Brilliant ideas to make the most of every drop of oil
Annual Report 2019 Contents
The year in Brief ...... 3
Message from the CEO...... 4
This is how we do it ...... 6
Board of Directors’ Report ...... 8
Sustainable Development report...... 21
Corporate Governance...... 27
Board of Directors...... 32
Group Executive Committee...... 33
Multi-year overview...... 34
Financial Statements...... 35
Accounting policies...... 45
Contents Notes ...... 52
Notes ...... 53
Assurance ...... 99
Auditor’s report...... 100 Definitions and reconciliations of alternative performance measures ...... 102
The formal annual report comprises page 8 to 100. NYNAS ANNUAL REPORT 2019 THE YEAR IN BRIEF
2019 – a challenging year for Nynas
› Net sales during the year amounted to SEK 16,841 › Following intensive research, Nynas launched the million (16,863). Sales volumes for Naphthenics non-mineral based NYTEX® BIO 6200 tyre oil in decreased by 2 per cent on 2018 actuals, mainly March. A product developed to help customers explained by impact of sanctions. Volumes across with their sustainability efforts. This was followed the Bitumen business 2019 were the same as last by the introduction of a fully recyclable bio-based year, despite supply constraints. transformer fluid, NYTRO® BIO 300X, which offers improved cooling compared to mineral oils and › Nynas recorded the best health and safety perfor- ester liquids. mance ever in the company. Improvements in this area has been in focus for many years and we are › In the spring there was a major planned mainte- proud of the result, especially in a year with great nance and inspection stop at the Nynäshamnn challenges. refinery. During six intense weeks approximately 20,000 activities were carried out. A very extensive › The US sanctions on the company’s shareholder, and demanding project with, at most, nearly a Venezuelan PDVSA, continued to have a detrimental thousand entrepreneurs on site as well as support- impact on the Nynas business. The pressure escalated ing experts from other Nynas refineries. in January when the US made it impossible for Nynas to make payments in USD. The situation › On May 12, 2020, the US Treasury Department’s deteriorated further in October when Nynas was Office of Foreign Asset Control (OFAC) announced prohibited from purchasing Venezuelan crude oil. that Nynas was no longer blocked pursuant to the Venezuela Sanctions Regulations. As a result of a › The effects from the sanctions led to the with- corporate restructuring of the ownership of Nynas drawal of bank financing at the end of the year, AB, sanctions were lifted and US persons and leaving Nynas with no other choice but to file for companies no longer required an authorisation company reorganisation at the District Court on from OFAC to engage in transactions or activities December 13. with Nynas AB.
› Nynas continued to increase the amount of crude oil sourced outside of Venezuela. Nynas stopped all purchases of Venezuelan crude oil after being prohibited by US sanctions on October 17.
UNDERLYING BUSINESS NET SALES AND OPERATING RESULT RESULT (ADJUSTED EBITDA)1 OPERATING CASH FLOW
SEK million SEK million SEK million SEK million 18 000 1 500 1 00 500
15 000 1 000 1 200 0 12 000 500 1 000 500 9 000 0 800 1 000 6 000 500 600 1 500 000 1 000 00 0 1 500 200 2 000 2 000 0 2 500 2015 2016 2017 2018 2019 2017 2018 2019 2017 2018 2019 Net sales Operating result
1) For definition please see Board of Directors’ Report page 10
3 NYNAS ANNUAL REPORT 2019 MESSAGE FROM THE PRESIDENT
Reorganising for the future
Nynas had another difficult year, with US sanc- of having to carry the unfair burden for a Swedish tions hitting us harder than ever. As we entered company of being subject to US sanctions. This long 2020, however, the situation was looking much period since August 2017 under sanctions has been more hopeful and in May the sanctions were a very challenging time, but now with sanctions lifted. finally lifted, we expect to successfully finalise the reorganisation. Nynas began 2019 with cost-cutting measures, including the restructuring of our Bitumen UK oper- While these processes have taken a great deal of ations, to make us more competitive in an increas- time and energy, the Nynas organisation still man- ingly challenging market. aged some tremendous achievements during 2019, including a number of exciting product launches. The market challenges have been compounded by US sanctions on the Venezuelan government and Notable achievements Nynas shareholder, Venezuelan state oil company Following intensive research, we launched the non- PDVSA. The sanctions continued to have the most mineral based NYTEX® BIO 6200 tyre oil in March detrimental impact on the business, with escalated 2019. It was the first product launch from our pressure in January 2019 from the US Treasury NYTEX bio-based range of tyre and rubber products Department’s Office of Foreign Asset Control that have been developed to help customers with (OFAC) to list PDVSA as a “Specially Designated their sustainability efforts. This was followed by National” (SDN). The situation deteriorated further in the introduction of our new fully recyclable bio- October. Our general license exempting us from the based transformer fluid, NYTRO® BIO 300X, which SDN listing was renewed, but Nynas was prohibited offers improved cooling compared to mineral oils from continuing to purchase Venezuelan crude oil. and ester liquids.
Lifting sanctions and reorganisation Nynas received leading tyre manufacturer Pirelli’s best The increasing pressure from the sanctions led to supplier award, in recognition of our high quality and the withdrawal in December of our bank financing, service level. Nynas was one of nine suppliers selected leaving the Nynas board of directors with no other from a global list of more than 10,000 suppliers. choice but to file for company reorganisation at Sweden’s Södertörn District Court on December 13. Nynas also recorded the best health and safety performance ever in the company. We have been At the time of publishing this annual report, the focusing on improvements in this area for many reorganisation process is still underway. A decisive years and can be extremely proud of our safety cul- step was taken on May 12 when the US authorities ture, especially in a year when such challenges were announced that Nynas was no longer being blocked even greater than usual. pursuant to the Venezuela Sanctions Regulations. Having exited sanctions Nynas will be able to return In the spring we conducted a planned turn-around to normal trading conditions and secure long-term and major maintenance activity at our Nynäshamn financing. This also means an end to many years refinery that involved nearly 1,000 entrepreneurs on
4 NYNAS ANNUAL REPORT 2019 MESSAGE FROM THE PRESIDENT
site as well as experts from other Nynas refineries. Approximately 20,000 activities were carried out during a six-week period to make the refinery safer and more efficient and environmentally friendly.
Crude oil sourcing Due to the sanctions prohibiting Nynas to source Venezuelan crude oil, we intensified our efforts to switch our feedstock to other crudes. We are working intensely to make sure specifications and customer demands continue to be met and have invested in reconfiguring our refineries to adapt to the new feedstocks. While this is a costly and time-consuming process, we were able to achieve a great deal in a short time and with fewer invest- ments than originally anticipated. This achievement is thanks to the ingenuity of the Nynas organisation to find workable solutions.
Despite having one of our toughest financial years ever, I believe the changes we are making today are moving us in the right direction. I thank the entire organisation for your efforts, support and energy in this difficult environment. I also thank our sup- pliers and customers for your continued confidence in Nynas. We sincerely appreciate your patience and loyalty and are working diligently to meet your demands with the high quality products and service you have come to expect from Nynas.
BO ASKVIK President and CEO, acting
5 This is how we do it After 90 years in the market, Nynas is a leading international oil specialist in a number of segments. The focus on products with a long useful life, in many cases up to 40–50 years, differentiates the business from traditional oil companies.
FROM CRUDE OIL TO CUSTOMER
The crude is transported by The production process In the hydrogenation plants, The finished products are ship from various sources starts in the distillation tow- the various distillates are stored in tanks and delivered around the world to Nynas er. The crude is divided into treated with hydrogen to customers by road tankers refineries. different fractions. At the top under high pressure. Hydro- and ships. Bitumen, which of the tower two light frac- genation provides the oils does not travel well over tions are extracted – known with properties demanded long distances, is transported as distillates – which are in terms of, for example, how to over long distances, but made into specialty oils, and viscous they are at different goes to customers in Europe, at the bottom is bitumen. temperatures, how easily while naphthenic specialty they blend with other prod- oils are shipped all over the ucts and what environmen- world. tal properties they possess.
61 7 UNRIVALLED TECHNICAL EXPERTISE Technical Application experts labs for bitu- Nynas has a laboratory dedicated exclusively and research men, greases, to studying oil. The more we learn, the more ers throughout adhesives, insightful our product development becomes. the world with rubber and On the applied side, our research teams have access a deep under- the electrical to advanced laboratories, including bench-scale standing of the industry. hydrotreatment units and micro-reactors. These bitumen, lubri- resources allow us to create just the right solution for cant, process a given application. oil, automotive and electrical industries.
6 THE SPIRIT OF NYNAS In Nynas there is a special spirit that is reflected in everything from customer care to USE IT, DON´T BURN IT decision-making, and thus affects everyone who comes into contact with us. Every single Nynas is an oil company unlike durability of our bitumen employee is a key player in the company, a any other. Most oil companies binders, as well as their ability specialist in his or her field, from the research turn their crude oil into fossil to be recycled, all contributes to scientist and business developer to the pro- fuels, which are then burned. more sustainable roads in Europe. duction engineer and shift operator. We are We burn as little oil as possible. Nynas naphthenic oils contribute also service-oriented with a proactive attitude Nynas transforms precious crude to a more sustainable product in a that powers our business and pervades our oil into high quality bitumen and large number of applications. daily work. Thanks to our dedication and com- naphthenic specialty oils that In 2019, we also launched petence, we can provide our customers with bring value to our customers in our first ever non-mineral customised solutions. a wide variety of applications. Our oil-based products. cold mix products and the high
WE ARE EVERYWHERE
Nynas products support growth in infrastructure Nynas powerful naphthenic and touch most people's lives on a daily basis. Roads, oils are used to lubricate roofs, running shoes, adhesives, rubber, paint, mag- windmill turbines and for azines and lubricants are just some of the thousands insulation in transformers of everyday objects that contain Nynas oils. connecting wind farms to the grid.
A true bitumen specialist, Our bitumen binders for Nynas plays an important Our naphthenic oils are used Nynas produces asphalt industrial applications are role in the transition to in a large number of rubber binders with top perfor- used to protect against electrical vehicles, as a applications, making shoe mance when it comes to moisture, sound, electricity producer of high-perfor- soles more hardwearing durability, lifespan and and fire in products such as mance oils needed to power as well as improving traffic noise reduction. pipe linings, sound dampen- tomorrow’s electrical infra- rolling resistance, grip and ing panels, electrical cables structure, as well as being a environmental performance and roofs. supplier to the automotive in tyres. industry.
WORLD-CLASS SUPPLY CHAIN
Nynas has sales offices in all corners of the world. 30 Thanks to a global distribution network, it is Containers possible to meet the market’s strict demands and 4 bitumen for safety, service and cost-efficiency. Access to ships at sea at depots for storage all over the world makes it any given time possible to deliver Nynas products to almost any of the year. location at all.
4 3 44 42 32 Refineries Hubs Depots Offices Countries
7 NYNAS ANNUAL REPORT 2019 BOARD OF DIRECTORS’ REPORT
Board of Directors’ Report
The Board of Directors and President of Nynas payments are required to be made. In addition, Nynas AB, Corp. Reg. No. 556029-2509, hereby submit has sufficient liquidity for 12 months to cover day to the Annual Report and the consolidated financial day operations based on assumed crude price levels statements of the 2019 fiscal year. and that Nynas can complete planned and necessary purchases of oil directly and through off-balance sheet GOING CONCERN ASSESEMENT crude purchase arrangements yet to be signed to meet Nynas AB entered into a formal company reorganisa- demand and maintain production volumes. tion (Sw. företagsrekonstruktion), by its own applica- The shareholders’ continued support, evidenced inter tion, after a decision by the District Court of Södertörn alia by the recent ownership restructuring to take Nynas on December 13, 2019. After extensions, the restruc- out of US Sanctions, the shareholder contribution and the turing will currently cease on September 15, 2020, if decision apply going concern on the second control bal- not further extensions are made. ance sheet and resolve to continue its operation, is a key In its assessment of going concern the Company has element for a successful conclusion of the reorganisation. taken several uncertainties into due and careful consider- The support from the major creditors, the share- ation. The Company has further assessed the related mit- holders and the administrators taken together with the igating plans and actions, including the various liquidity business plan showing that Nynas is a viable business and sources identified, the process Carnegie has initiated to the process run by Carnegie to find new capital, means find additional financing (equity and debt), as well as the that Nynas has reason to believe that the reorganization business plan. would be successful. Several material uncertainties have been removed Based on the above-mentioned circumstances after the fiscal year was ended at the date of signing the together, it is the Board’s assesment that the accounts Annual report. shall be prepared on a going concern basis despite the • On May 12, 2020, OFAC announced that Nynas is material uncertainties identified. no longer being blocked pursuant to the Venezuela Sanctions Regulations. All sanctions are lifted, and OPERATIONS, STRATEGY AND US persons and companies no longer require an ECONOMIC CONDITIONS authorization from OFAC to engage in transactions Nynas is a global company with a strong position in niche or activities with Nynas AB. markets. The specialisation in NSP (naphthenic specialty • The Company has by end of March 2020 received products) and bitumen sets Nynas apart from most other an equity contribution from its shareholders in the oil companies, which offer oil as a source of energy. amount of approx. EUR 119 m, which was made by Nynas’ core competence is to refine heavy crude way of a shareholder contribution of the subordi- oil into a balanced mix of long lasting, high perfor- nated shareholder loans from June 2018. mance specialty products for sustainable use. Nynas is • On May 29, 2020, the Company has agreed with a leading brand and global market leader in NSP and the major creditors; the Banks and the largest crude a market leader in bitumen in the European market supplier to extend the termination dates until June where it operates. Nynas’ products support growth 30, 2021. in infrastructure and touch the lives of nearly every- • The equity contributions, together with the going one every day through their presence in roads, roofs, concern assumption, has made it possible for the running shoes, adhesives, rubber, paint, magazines and board of directors to resolve to prepare a second lubricants, which are just some of the thousands of control balance sheet where the Company’s share everyday objects that contain Nynas oils. capital is restored which, on May 29, 2020 allowed The products are sold in markets worldwide. Nynas the shareholders to resolve that the Company may has approximately 1,000 employees at four production continue its operations. facilities and 32 sales offices. Sales in 2019 amounted to SEK 16.8 billion. The most material uncertainties remaining relate to the ability of the Company to refinance its debts to the Nynas strategy and vision major creditors in June 2021, and forthwith meet the Nynas’ vision is to strengthen its position as the global conditions for the agreed extension. Further uncertain- leader in naphthenic products and as the premier bitu- ties exist in relation to the Company’s ability to finance men partner in Europe. Our strategy for achieving this its liquidity needs going forward and to hedge its vision is aligned with key global trends and comprises primary and secondary risks. According to the Com- activities to improve operational excellence and expand pany’s business plan, it will be able to meet and pay our product and service offerings. its liabilities to other creditors than the major creditors Five key industry trends continued to have a strong when the current reorganisation is concluded, and such impact on our business in 2019; infrastructure growth,
8 NYNAS ANNUAL REPORT 2019 BOARD OF DIRECTORS’ REPORT
a growing middle class, environment and health, times until May 14, 2020. Nynas remained engaged electrification and digitalisation. These trends affect with OFAC for the execution of a proposed corpo- not only the demand for our naphthenic and bitumen rate restructuring that would result in a significant products, but also the types of products we develop. change to Nynas’s ownership and control before May 14. On May 12 ,2020, OFAC lifted the sanctions Market and economic development on Nynas after completion of the proposed corpo- Nynas sales are dependent on the economic develop- rate restructuring. ment in a broad range of industrial sectors as well as • After January 28, 2019, Nynas’s banks refused to remit infrastructure investments. Naphthenic specialty oils payments for Venezuelan crude oil purchases made are sold worldwide and used by industrial customers from the largest crude oil supplier. with reference to representing different stages of the business cycle in the SDN listing of PDVSA. Nynas protested to its banks both leading and lagging sectors. Bitumen sales are against their refusal to transfer funds, as being incor- regional and mainly dependent on investments in road rect as interpreted by Nynas’s external counsel. construction and maintenance. • Nynas submitted in December 2018 a request to Global activity, measured through average compos- its lenders, a bank syndicate of 6 banks, to exempt ite PMI, ended 2019 at 51.7. A noticeable drop from non-recurring sanctions impact when calculating 2018 average of 53.6. Looking quarterly the index has covenants for Q4, 2018. The banks did not respond constantly been declining for the last 7 quarters. to this request, instead a waiver was given in April Looking at the Eurozone GDP annual growth rate 2019 for testing interest coverage for Q4, 2018. A was 1.2 per cent and the Purchasing Managers’ second request to banks was submitted concerning Composite Index (PMI) decreased to a level not seen Q1 2019 covenants, approved by the lenders March since mid-2013 ending at 50.6 in 2019, a decrease 29, 2019, subject to a request for extensive financial from 51.1 in 2018. The US PMI ended 2019 at 52.2 reporting. In addition, lenders requested a confir- which is down from 53.6 year-end 2018. According to mation of working capital support to Nynas by the PMI-data business growth accelerated second half shareholders, but no capital support was confirmed. of the year however still held back by manufacturing • Nynas largest crude oil supplier stopped deliveries struggling to reach equivalent momentum. The same in May 2019 due to outstanding unpaid invoices. applies to GDP growth rate with manufacturing Deliveries were resumed in July after agreeing on dragging GDP growth rate ending the year at approxi- prepayment of each cargo. matly 1,5 per cent. The global weakness is also seen in • On July 10, 2019 a standstill agreement for one BRIC countries with composite PMI indexes all below week was agreed with Nynas’s lenders and the previous year annual averages. Still, all BRIC countries crude oil supplier. This was extended weekly up until except Brazil have performed better than Global December 2019. Composite PMI in 2019 as a whole. • On September 12, 2019, the board of Nynas AB On monthly averages Brent prices increased from (the “Company”) resolved to prepare a control December 2018 and peaked at 71 USD/bbl in April balance sheet at liquidation value based on the com- after which it dropped to the year low 59 USD/bbl in pany’s financial situation and applicable sanctions, August. Brent price ended the year at 67 USD/bbl and and have it reviewed the Company’s auditor and on the average for the year was 64 USD/bbl, 9 per cent October 1, 2019 a first shareholders control meeting lower than previous year average of 71 USD/bbl. was held that decided to continue business opera- The US dollar, Euro and British pound all strength- tions. A second control shareholders control meeting ened versus the Swedish krona during 2019 compared needs to be convened and held within the 8 months to 2018. For the year US dollar was on average 4 per timeframe no later than 1 June 2020. cent stronger than last year ending at 9.30. Euro ended • On October 17, 2019, US Department of the Treasury at 10.45, 2 per cent stronger than last year and British also prohibited Nynas from purchases of crude oil pound strengthened by 7 per cent compared to 2018 from Venezuela. ending at 12.28 versus the Swedish krona. • On December 11, 2019, the Company’s lenders, the Banks, terminated the loans under the Facilities SIGNIFICANT EVENTS DURING THE FISCAL YEAR Agreement and demanded repayment by notice on • On January 16, 2019, the company CFO Bo Askvik December 11, 2019. was appointed interim President and CEO of Nynas. • On December 13, 2019, Nynas AB entered into a • On January 28, 2019, the U.S. Department of the formal company reorganisation (Swedish företags Treasury’s Office of Foreign Assets Control (OFAC), rekonstruktion), by its own application, after a deci- designated PDVSA as a Specially Designated National sion by the District Court of Södertörn on December (SDN). Concurrently, OFAC issued a General License 13, 2019. After extensions, the restructuring will (GL 13), authorizing all transactions and activities currently cease on June 15, 2020, if not further where the only PDVSA entities involved are Nynas AB extensions are made. or any of its subsidiaries, enabling Nynas to con- • On December 17, 2019, the Banks produced a tinue its business. GL 13 has been extended three unilateral set-off statement and approximately SEK
9 NYNAS ANNUAL REPORT 2019 BOARD OF DIRECTORS’ REPORT
0.7 billion standing to the credit on some of Nynas’ ing and lack of crude, calculated to approximately accounts held by the Banks was applied towards SEK 471 million (compared to budget). partial payments of the Bank’s receivables, which has Bridge between operating result and underlying busi- severely impaired the Company’s cash position. ness result (EBITDA): PERFORMANCE OF THE GROUP’S OPERATIONS, 2019 2018 EARNINGS AND POSITION Operating result according to Net sales income statement -1,707 -178 Net sales during the year amounted to SEK 16,841 Impairment write-down fixed assets 1,217 – million (16,863). Total product sales volume in line with Sanction related costs 471 273 last year. The Naphthenics 2019 sales volume decreased Write off of receivable against PDVSA 125 – by 2 per cent due to US sanctions and uncertainty Resignation and reorganization related costs 43 – regarding the General License impact with customers reducing their risk towards Nynas by shifting to other Maintenance stop Nynäshamn refinery 15 – suppliers. Bitumen volumes in 2019 in were in line with Environmental provision – -21 last year. Venezuela’s crude supply constraints mainly Other 17 29 impacted in the early second and fourth quarter due to TOTAL NON-RECURRING 1,888 323 US sanctions. Share of profit joint ventures 17 13 Operating income and underlying Depreciation and amortization 640 647 business result (adjusted EBITDA) and Depreciation right of use assets 339 – non-recurring items UNDERLYING BUSINESS RESULT 1,177 805 Operating income during 2019 amounts to SEK -1 (ADJUSTED EBITDA) 708 million (-178). The US sanctions on the company’s shareholder, Venezuelan PDVSA, continued to have a Research and development detrimental impact on the Nynas result. The pressure Nynas has its own R&D unit and laboratories support- escalated in January when the US made it impossible ing the company’s long-term strategic goals through for Nynas to make payments in USD. The situation product development and optimisation of Nynas deteriorated further in October when Nynas was refineries and processes. Within the naphthenic and prohibited from purchasing Venezuelan crude oil. bitumen product areas, Nynas engages in research and The underlying business result adjusted for sanction development of products, solutions and applications. effects amounts to SEK 1,177 million (805) and was Sustainable development, addressing our climate and driven by a good year in sales in the Bitumen Nordic environmental impact both in our own value chain and and Western Europe region offset by lower cost of that of our customers where our products are applied, goods sold on Naphthenics product. Non-recurring is one of the main driving forces for Nynas’ R&D work affecting the operating result totalled SEK -1,888 and innovation priorities. Health and safety, quality, million (-323), mainly explained by the impacted of: performance, and extending the lifetime of products, • An impairment loss of SEK 1,217 million mainly due to are other key drivers in the company’s R&D efforts. NSP refinery assets value in use was higher than net Research and development expenses were below realizable value, the impairment loss valuation is based 1 per cent (1) of net sales in 2019. on future discounted cash flows according to the Busi- ness Plan approved by the board on May 13, 2020. Seasonal variations • The effect of the US sanctions on Venezuela, caused Nynas operations in bitumen show seasonal variations non-recurring costs for supply resulting in higher particularly in the Nordic area. The majority of net sales product costs due to more expensive external sourc- and operating result is generated in the second and third
CAPITAL EMPLOYED AND RETURN NET SALES AND OPERATING RESULT ON AVERAGE CAPITAL EMPLOYED
SEK million SEK million SEK million % 18,000 1,500 12,000 18
15,000 1,000 10,000 15 12,000 500 8,000 12 9,000 0 6,000 9 6,000 500 ,000 6 3,000 1,000 Net sales Capital employed Operating 0 1,500 2,000 3 Return on average result 2,000 0 0 capital employed 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 (12 months rolling)
10 NYNAS ANNUAL REPORT 2019 BOARD OF DIRECTORS’ REPORT
quarters. During a rolling twelve-month period ending Bitumen December 31, 2019, average working capital amounted Volumes in 2019 were the same as last year, across the to SEK 3,116 (4,602) million. Year-end working capital as Bitumen business, despite supply constraints. of December 31, 2019 of SEK 1,651 million, impacted by The Nordic region had a good year in sales, despite the issues related to the reorganisation. a difficult supply situation. During the latter part of the peak season, bitumen inventory was record low. Net financial items External bitumen had to be purchased to fulfill the Net financial items for the year amounted to SEK contractual commitments and market demand. Despite -775 million (-414) of which SEK -451 million (-342) the supply disturbances, strong demand and positive is related to net interest expenses. The higher net contribution from currency offset some of the negative interest costs are largely explained higher average gross supply impact. debt and other interest bearing liabilities during 2019. In the UK region, strong competition kept sales prices low. Low throughput in the Eastham refinery Taxes increased the cost per ton, which negatively impacted The effective tax rate including non-deductible and the year’s result. non-recurring items was -20 per cent (-34). The effective Sales in the Western Europe region increased com- tax rate for 2019 has been negatively affected by non pared to last year, and supported by the weak Swedish capitalised tax losses of approximately SEK 290 million krona improved the financial result of the region. due to the current result level in the parent company. Sales of upgraded products decreased somewhat, particularly polymer modified bitumen was low in Returns demand. Sales of products with value added proper- Return on average capital employed (12 months rolling) ties contributing to customers sustainable applications was 2.1 per cent (1.4), return on average capital increased this year, continuing a positive trend. 2019 full employed, calculated excluding non-recurring items and year net sales reached SEK 8,624 million (8,611), in line return on equity was -162.6 per cent (-23.4). with sales in previous year. Underlying business result before depreciation (EBITDA) was SEK 457 million (462).
PERFORMANCE FINANCIAL POSITION Naphthenics Working capital Sales volumes in 2019 decreased by 2 per cent on The seasonal pattern of Nynas’ bitumen business is nor- 2018 actuals fully related to sanctions. The sales mally reflected in the development of the financial posi- region EMEIA (Europe, Middle East, India and Africa) tion during the fourth quarter, with an expected reduc- was the most affected with significant volumes lost in tion in working capital compared, to previous quarters Middle East (Iran sanctions) and sanctions related con- during the year. Working capital is also impacted by cerns by customers reducing their exposure. The same changes in the crude oil price, quoted in US dollars, and was relevant for APAC with customers lost directly due by currency when reported in Swedish krona. to sanctions. In Americas the volumes increased com- Working capital at the end of December 2019 was pared to 2018 as 2018 was a low year for the region at SEK 1,651 million, a decrease of SEK 3,202 million impacted by supply constraints. compared to last year. Inventory net of crude payable 2019 full year net sales decreased to SEK 8,210 was SEK 3,328 million lower compared to the end of million (8,305) foremost due to the decreased sales December 2018. The lower net inventory is explained volume. Underlying business result before depreciation by SEK 2,720 million higher Crude payable, SEK 20 (EBITDA) increased to SEK 435 million (328) driven by million higher inventory value due to the higher oil price lower cost of goods. and by 131 kton lower volumes in inventory, a decrease of SEK 630 million. Current receivables at the end of
CASH FLOW FROM NET DEBT AND Net debt OPERATING ACTIVITIES INVESTMENTS WORKING CAPITAL Working capital
SEK million SEK million SEK million
2,500 1,500 8,000 2,000 7,000 1,200 1,500 6,000 5,000 1,000 900 ,000 500 600 3,000 0 2,000 300 500 1,000 1,000 0 0 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019
11 NYNAS ANNUAL REPORT 2019 BOARD OF DIRECTORS’ REPORT
December 2019 reached SEK 2,397 million, which is a assets decreased by SEK 335 million (from 12,664 decrease of SEK 162 million compared with last year. million SEK to SEK 12,455 million). Capital expenditures totalled SEK 471 million (248) for the full year. The Fixed assets number of employees in the parent company on Fixed assets have increased by SEK 65 million, an December 31 2019 was 472 (460). increase due to the new IFRS 16 lease accounting standard of SEK 1,308 million offset by an impair- ment write-down of SEK 1 217 million, mainly due to RISK MANAGEMENT NSP refinery assets value in use was higher than net All business operations are exposed to various realizable value, impairment write-down was based on risks. The purpose of Nynas’ risk management future discounted cash flows. activities is to limit, control and manage the risks involved in a proactive manner, to best secure the company’s potential opportunities. Capital expenditures The main investment in 2019 was in relation to the The main components of risk management are identifi- planned turn-around in Nynäshamn. Nynas has, during cation, evaluation, mitigation, monitoring and report- the past few years, undertaken investments to increase ing. Nynas continuously strives to increase awareness the reliability, productivity and flexibility of its manufac- and to reduce risks in all areas of operations. Risks that turing operations. Going forward Nynas has a strong are managed correctly can create opportunity and lead platform to increase its supply of NSP volumes. to value creation, while risks that are handled incor- During 2019 cash capital expenditures totalled SEK rectly can result in negative financial consequences. 595 million (426) for the full year, with the main por- tion relating to maintenance investments. Enterprise Risk Management The purpose of ERM at Nynas Group is to support the Financing Group’s strategic priorities by managing and mitigating Net debt increased by SEK 1,482 million at the end of risks to achieving objectives, support wider risk man- December compared with last year, primarily reflecting agement initiatives across the Group and to further an increase due to the new IFRS 16 lease accounting stan- foster the risk aware culture within the organisation. dard offset by higher cash and somewhat lower interest The Group risk register, identifies, describes and eval- bearing debt to credit institutions. Long-term interest- uates Nynas’ specific risk profile from a high-level per- bearing liabilities includes defined pension obligations spective. The Group risk register was reviewed during of SEK 1,113 million (929). Due to the minor increase in the risk workshop in 2019, where identified risks were discount rates an actuarial loss has been accounted for of assessed against two criteria; impact and likelihood, SEK -129 million (-9) against other comprehensive income and the status of improvement plans were reviewed. (equity) less deferred tax of SEK -14 million (4). These plans contain specific actions, success measures and responsible parties for improving Nynas’ risk miti- Equity gation strategies. The risk register is a living document Equity at year end amounted to SEK 46 million (3,250). and subject to constant review and evaluation as Nynas The equity/assets ratio was 0,3 per cent (22.9). develops its business activities in the ever-changing risk landscape. The risk identified and explained below are Cash Flow not in hierarchical order. Full year cash flow from operating activities amounted As part of the ERM programme, the Nynas Enter- to SEK 2,054 million compared to last year’s SEK -963 prise Risk Forum (the Risk Forum) is responsible for million. Operating cash flow in 2019 was positively alignment of all risk management strategies and acts affected by the higher cash levels by the end of the year. as the coordination point for enterprise-level direction setting regarding risk management issues. Employees The different steps in the Nynas Enterprise Risk As a global company, Nynas comprises a diverse group Management process are briefly described below: of employees from different countries and cultural backgrounds. What they all share is a strong Nynas • Establish the context. The first step in the enter- culture with its three core values: Dedication, Coopera- prise risk management plan is to establish the con- tion and Proactivity. text of the environment within which the organisa- The average number of employees during 2019 was tion, programme area or department operates. The 985 (1,003). environment in which Nynas operates is complex and a number of factors need to be considered PARENT COMPANY when determining the parameters within which Net sales during the year amounted to SEK 14,704 risks must be managed. Key considerations include million (15,056), with the increase mainly explained by Nynas’ vision, mission, corporate values, strategic the higher oil price level. Operating result amounted priorities, and business plan. to SEK -699 million (-303). The parent company’s total • Identify the risk. The identification of risk may
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Treasury, Manufacturing, Supply Chain and the Businesses Establish the context are Risk Forum members. The role of the Risk Forum Members is to review assessment information and work
Communicate and consult with functional areas and risk owners to accept respon- Identify the risk sibility for developing pro-active risk mitigation plans according to significant risks identified, and to provide regular reporting against established mitigation plans. Assess the risk Furthermore, the members actively engage in forum discussions for the purpose of “issue spotting” within the
Monitor and measure field of responsibility and for other areas as well. Evaluate the risk 2nd Line of Defense The role of the second line of defense is to provide risk Control the risk management support, facilitation, and consultation. The Risk Forum, chaired by the Chief Financial Officer (CFO), uses the ERM process pro-actively as a method to occur in a retrospective manner, i.e. looking back reduce uncertainty and support achievement of Nynas’ over completed work, tasks and activities. Identify- goals and objectives, and in addition, actively identify ing potential risks before they present challenges is opportunities for upsides and revenue enhancement. the ideal method of minimising risk; this is known as The Risk Forum is responsible for reporting on the prospective risk identification. management status of high level and significant risk • Assess the risk. Once risks have been identified, management information to the Nynas Executive Com- they are to be analysed to determine the overall mittee at least semi-annually and annually to the Board level of each risk and establish priorities. Identified of Directors/Audit Committee. risks are assessed against two criteria: impact and The risk management function is located in Nynas AB likelihood. The overall level of risk is determined and the Group Risk Manager supports local sites, busi- by multiplying the likelihood rating and the impact ness units and the Executive Committee in strategic deci- rating to produce the Gross Risk Score (GRS). sions concerning risk and insurance issues. The Group • Evaluate the risk. The aim of this step is to decide Risk Manager manages and coordinates all Group insur- whether the level of risk is acceptable or not. Risk ance programmes and supports the ERM process and may be accepted if, for example, there are sufficient internal captive. Furthermore, the Group Risk Manager controls in place. prepares reports and acts as liaison between risk owners • Control the risk. Control over risk can be obtained and the Risk Forum and ensures that significant risks are through different methods, for example transferring addressed and significant opportunities for pro-actively the risk to insurance or modifying the risk through reducing uncertainty are advocated. The Group Risk appropriate risk mitigation strategies. Manager is part of the Nynas Finance department and reports directly to the CFO. Risks are also monitored continuously in order to Nynas General Counsel ascertains Group compli- determine if the level of risk (i.e. likelihood or impact) ance and oversees compliance related issues within the has been reduced and whether other measures could be implemented. Board of Directors
Risk Governance Audit Committee Nynas Board of Directors has the ultimate responsibility for risk oversight. Practical implementation, develop- ment and monitoring of the risk management process CEO and Risk are based on the three lines of the defense model. Nynas EC Forum
Business Areas 1st Line of Defense Risk Compliance/ Internal and Support Nynas’ CEO and Executive Committee have the overall Management Legal Audit responsibility for proper risk management. A risk functions management responsibility is also delegated to the site and business unit level. Each manager with operational Risk Forum Members responsibilities is expected to ensure that risks associ- ated with the operations are appropriately identified, 1st line of evaluated, managed, mitigated and, as appropriate, 3rd line of defense 2nd line of defense defense escalated to the Group level. Ownership for Risk management support Independent risk taking and facilitation and consultation Representatives from different Nynas departments, assurance e.g. Legal, Human Resources, Sustainability, ISIT, HSSEQ, risk treatment
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Group. The General Counsel also ascertains adequacy Risks relating to Covid-19 of mitigation actions in higher risk compliance areas. The Group conducts its business within the specialty oils market and is consequently affected by general 3rd Line of Defense economic trends outside the Group’s control. The occur- Internal Audit evaluates the effectiveness and efficiency rence of extraordinary events, such as the outbreak of of the Group’s risk governance model and related risk disease epidemics, has an adverse impact on the global management processes, including the effectiveness economy as a whole and may lead to a global recession, of internal controls and other risk treatment actions. or even depression. The outbreak of Covid-19, which Internal Audit also provides recommendations for first emerged in China in December 2019, is consid- improvement areas. ered a pandemic and has led to a major slowdown in economic growth during the first quarter of 2020, partly Insurance due to the spread of Covid-19 itself, but even more so Nynas transfers certain and specific risk exposures to the due to the political decisions enacted across different commercial insurance and reinsurance markets. Further nations in order to try to contain Covid-19, such as quar- actions are also taken to reduce these insurable risks as antines, shut downs and restrictions on mobility. Whilst part of Nynas’ loss prevention strategy. This is done to the direct and indirect impact of the Covid-19 outbreak reduce the potential for significant losses and to ensure remains uncertain, a number of central banks and gov- the Group’s ability to deliver to its customers without ernments have announced financial stimulus packages interruptions. The insurance and reinsurance capacity is in anticipation of a very significant negative impact on purchased by way of using international insurance brokers GDP during 2020. Concerns remain as to whether these and the insurance and reinsurance policies placed are tai- policy tools will counter anticipated macro-economic lor-made to Nynas specific demands and risk exposures. risks. A prolongation of the outbreak could significantly Part of the Group’s property damage insurance pro- adversely affect economic growth, and impact busi- gramme is provided by the in-house insurance company ness operations across the economy generally and, by Nynas Insurance Company Ltd. Nynas’ Finance Policy puts extension, Nynas sales and operations, both as a result strict demands on the financial security of insurance and of weakened economic activity and in terms of the reinsurance companies that Nynas elects to transfer risk health and wellbeing of employees being affected. Such to. Nynas’ minimum financial security demand is equal to weakening of the economy and/or operations could a Standard & Poor A- rating or equivalent AM Best. have a material adverse impact on the financial perfor- mance or operations of, or the cost of funding for, the Risk Surveys Group. In addition, there is currently no reliable way to Every third year, risk surveys are performed at the predict, with certainty, the timing or value of transac- Group’s refineries by risk consultants. The main purpose tions affected. Thus, the outbreak of Covid-19 may lead is to prevent potential property losses and business to investments being postponed or planned acquisitions interruption by means of loss prevention and control and/or divestments possibly not being carried out as recommendations. Further, Nynas Blue for depots is a planned, which could have a material adverse effect specific risk management project concerning Nynas’ on the Group’s business. The longer the Covid-19 crisis depot network and was launched in 2015. The project goes on it would have a negative impact on the Group’s aims to harmonise and implement common Group operations, financial position and earnings and it may standards regarding risk management, loss prevention become more difficult to raise capital, obtain loans or measures, management of change and emergency other financings or service existing debt. procedures among other topics. The Group’s depots are surveyed every third year by risk consultants and new Market risks targets are set for each round of audits. The market prices for crude oil and other feedstock, as well as refined petroleum products, are subject to sig- NYNAS GROUP’S RISKS nificant fluctuations resulting from a variety of factors Strategic Risks affecting demand and supply. It is inherently difficult Strategic risks are changes in the business environment to make accurate predictions as to how the oil markets with potential significant effects on operations and busi- will develop, as the oil markets are impacted by factors ness objectives. The Group is affected by international, over which the Group has no control. national and regional economic conditions. Strategic risks are market uncertainties and geopolitical tensions Competitor actions in oil-producing countries, turbulence on the oil market The Group faces domestic and international competi- and swings in crude and feedstock prices. Other strate- tion in the markets in which it participates. There is a gic risks include competitor actions, customer behaviour risk of technical development in the Group’s markets, and reputational risk. Nynas Executive Committee moni- including the risk of substitution, where some of the tors the development in the key markets and proactively Group’s products can be formulated by competitors assess macroeconomic risks and political risks but also with other components, that may eventually be more opportunities that may influence the Group’s strategies. competitive than the Group’s production. Nynas
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NYNAS RISKS Changes in the business environment Risks directly attributable to business Financial risks with a potential impact with potential significant effects on operations with potential significant on financial position and perfor- business objectives and operations impact on financial position and mance performance
Strategic Risks Operational Risks Financial Risks Covid-19 Production risks Currency risks Market risks Supply Chain risks Commodity risks Customer behaviour Products and Services risks Interest rate risks Competitor actions Health and Safety risks Financing risks Reputational risks Environmental risks Liquidity risks Competition and Anti-trust Legal and Regulatory risks Credit risks Information Systems and Technology risks Tax risks Human Resources risks Financial reporting risks Human and Labour Rights risks Political risks Anti-bribery and Anti-corruption risks
strives to be ahead of competition in terms of product activities in sustainability are further described in the development in close collaboration with our customers. Sustainable Development Report on page 21–26. To protect Nynas return on investments in market- ing, research and development, the Group actively Competition & Anti-trust safeguards its marketing and technical achievements The Group’s operations are subject to EU, US and local against trademark/patent infringements and copying. anti-trust regulations, in particular since the Group Nynas enforces its intellectual property rights through could be considered to have a dominant position within legal proceedings when necessary. certain sectors and territories. Breaching competition and anti-trust legislation could render substantial fines Customer behaviour and penalties but also reputational damage. Nynas has Nynas sales are dependent on the economic develop- a compliance programme which includes a competi- ment in a broad range of industrial sectors as well as tion and compliance policy, e-learning courses for all infrastructure investments. Naphthenic specialty oils employees as well as regular mandatory training for are sold worldwide and used by industrial customers in certain identified employees on how to comply with both leading and lagging sectors. Periods of economic competition and anti-trust legislation. Nynas business slowdown or recession can have a negative impact on ethics activities are further described in the Sustainable demand for specialty oil products in the markets and Development Report section about Ethics on page 26. industries which may be affected by a financial down- turn. Bitumen sales are regional and mainly dependent Operational Risks on investments in road construction and maintenance. The operational risks in Nynas Group are risks directly Countries with declining economic growth can decrease attributable to business operations with a potential their governmental and state spending on infrastruc- significant impact on financial performance. These are ture, which can affect the Group’s bitumen business. risks mainly associated with Nynas’ business operations Nynas is spreading its activities into several regions to such as refinery production, supply chain, products mitigate local variations in demand. and services and include the effectiveness of processes and operations. Other operational risks are commodity Reputational risk price volatility, dependence on information technology The Group constantly strives to perform in accordance and systems, insurance risks and political risks. Risks with certain ethical, environmental, health, quality and relating to compliance with laws and regulations are sustainability standards. Activities to maintain and further also included in this category. Operational risks also strengthen Nynas Group’s strong brand and good rep- include certain sustainability risks, e.g. health & safety, utation are constantly ongoing. These activities include environmental risks, dependence on human resources, ensuring compliance with Nynas’ Code of Conduct which business ethics and human rights risks. Nynas’ sustain- define the Group’s values with regards to business ethics, ability activities are further described in the Sustainable human rights, environment, health and safety. Nynas Development Report on page 21 – 26.
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OPERATIONAL RISKS CONTEXT MITIGATING ACTIVITIES Production risks The company’s products are mainly produced By having multiple sites Nynas is able to be flexible at its own refineries at three locations. Dam- and re-route the production if needed. ages to the facility by fire, explosion, leak- Production units are subject to continuous inspection ages or mechanical failure during operations programmes and risk management surveys to pre- or maintenance turnarounds, can result in vent incidents. property damage and business interruption. This may influence deliveries or the quality Extensive procedures and controls are in place and of products. Reduction in capacity, financial are audited regularly, in line with refinery industry impact on sales, lack of product and repu- standards. tational impact are other potential conse- quences. Third-party sourcing and supply chain management can mitigate supply interruptions and lack of certain products. Property damage and business interruption risks are to a large extent transferred to the insurance and reinsurance markets.
Supply Chain risks The availability of suitable crude oil and other The Group is technically prepared to run several dif- feedstock for production of refined petro- ferent crudes and raw materials to handle variations leum products at Nynas refineries is a critical in the feedstock market and in product demand. factor enabling Nynas to deliver its strategy. Nynas supply chain management works continuously The Group is further dependent on a num- with mitigating activities to minimize the conse- ber of important suppliers of certain mate- quences of lack of certain materials and utilities e.g. rials and utilities to ensure un-interrupted third-party sourcing of finished products to mitigate and high-quality production at its refinery supply interruptions. facilities. Interruption in such supplies can Business interruption at Nynas due to damage at influence the quality of products and/or key suppliers are to a large extent transferred to the cause business interruption which may result insurance and reinsurance markets. in, e.g., limited production capacity, lack of product and reputational impact.
Environmental risks The refineries and depots could have a risk The Group’s production facilities are designed and of damaging the environment through oper- constructed in accordance with well-established ations, e.g., spills and emissions. international technical standards in the refining industry. Nynas is dependent on certain licenses to operate its refineries, e.g., individual envi- Nynas ensures adherence to these standards through ronmental permits are required for the a system of internal technical standards and mini- refinery sites. Failure to meet environmen- mum requirements that are systematically internally tal regulations, e.g., REACH, environmental and externally audited. directive, SEVESO, etc. can result in loss of There is a Group Health, Safety, Security and Environ- license, negative reputational impact, loss of ment (HSSE) Director available to support the oper- business and customers. ations, and all large sites have appointed local HSSE Shipping vessels are the best way to trans- resources. port Nynas’ products and the Group charters Nynas has representatives in international organi- a significant number of voyages per year for sations in the HSE field such as CONCAWE, SPBI & crude oil and manufactured products. Dam- IKEM, SQAS and CEFIC and monitors new regulations. ages to or sinking of a vessel could cause environmental pollution and could poten- Nynas refineries are certified in accordance with the tially damage Nynas’ brand. ISO 14001 standard. Nynas charters a modern fleet with guidelines for third party shippers. Nynas further charters and monitors all ships chartered through its own ship- ping department Nyship. External vetting is utilised to assess the vessel’s suitability. Nynas is a member of the International Tanker Owners Pollution Federa- tion. Nynas purchases marine owner’s and charterer’s P&I insurance, as well as environmental impairment liability insurance worldwide.
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OPERATIONAL RISKS CONTEXT MITIGATING ACTIVITIES Health and Refinery operations, maintenance activities There is a Group Health, Safety, Security and Environ- Safety risks and the handling of hazardous products can ment (HSSE) Director available to support the oper- cause personal injury if safety procedures are ations, and all large sites have appointed local HSSE not followed and safety equipment not used resources. correctly. Nynas refineries are certified in accordance with ISO The nature of Nynas’ worldwide business 9001 and OSHAS 18001 standards and all employ- requires employees to travel to countries ees are reporting into a group-wide incident report- exposed to social and political unrest. Such ing system. business travel could negatively affect the Nynas learn from all serious incidents and near health and safety of individual employees. misses by exhaustive root cause analyses conducted by designated Lead Investigators from Nynas own training programme. The Group sets minimum requirements regarding many HSSE-areas and activities, and the adherence by sites and businesses are regularly audited. All managers at all levels are conducting regular HSSE-meetings during the year with their work groups and the outcome is cascaded throughout the organisation. Safety walks and safety talks are conducted regularly on site by both refinery and company management. Nynas has a network for Dangerous Goods Safety Advisors to ensure compliance with rules and reg- ulations on the safe handling and transport of dan- gerous goods. Contractors, drivers and temporary personnel receive regular health and safety training and it’s mandatory to use Personal Protection Equipment (PPE) in certain areas on site. Nynas has a Group travel policy constantly monitored by the Group’s Travel Manager and HR. Travel safety training for employees travelling to high-risk coun- tries is mandatory.
Information The Group relies on IT systems in its daily Nynas has a Group IT & Security Policy including Systems and operations including production. Disrup- quality assurance procedures that govern IT opera- Information tions or faults in critical systems can affect tions. Nynas’ global network is designed on a fall- Technology (ISIT) production and cause business interruption. back redundancy to minimise operational disruption. Errors in the handling of financial systems The system landscape is based on well-proven prod- can affect the Group’s reporting of results. ucts and market leading and established service pro- viders. Modification or theft of Intellectual Property constitutes a risk to the Group’s competitive Cyber security is regularly discussed and monitored edge and future business success. by the ISIT department. Employees are continu- ously reminded about cyber risks and encouraged Cyber security risks are increasing globally to report all cyber-related threats and attempts, and and can have a significant impact on the the IT security function reports on the trend monthly Group’s operations, financial position and to the Executive Committee. During 2019 risk man- result. agement efforts were continuously focused on risks associated with the globally increasing attempts on cyber-related crime.
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OPERATIONAL RISKS CONTEXT MITIGATING ACTIVITIES Products and The Group is exposed to risk for product lia- The Group has extensive quality control including sam- Services risks bility claims where the Group’s refined prod- pling throughout the entire supply chain and testing ucts are claimed to be defective and/or are performed by independent inspectors. claimed to have caused property damage or Nynas is actively participating in international bodies, personal injury. This could have an adverse setting global standards such as IEC and ASTM. effect on the Group’s financial position and results and could cause reputational The Group has extensive worldwide product liability and damage. professional liability insurance programmes in place.
Legal and Nynas is engaged in many different areas The Group has an established governance frame- Regulatory risks at a global level and conducts its business work including Group policies, Group procedures within the framework of rules and regula- and other steering documents. The scope of the gov- tions that apply in various countries, markets ernance framework, including the controls imple- and industry sectors. Non-compliance with mented, is partly based on legal requirements and import and export regulations, trade compli- risk exposure. ance rules, transfer pricing, excise duty and At Group level, Nynas has several functions monitor- VAT could result in fines and penalties, trade ing legal and regulatory risks such as Legal, HSSE and restrictions, personal liability on behalf of Product HSE to ensure compliance. Directors and reputational impact. The Group has implemented a Trade Compliance The Group’s business includes sales in ter- Policy including a policy document, training of rel- ritories subject to international sanctions. evant employees and third-party security screening. Non-compliance with international sanctions could result in fines and penalties, personal Nynas works together with leading international liability on behalf of Directors and reputa- legal advisors and other specialists on analyzing and tional impact. addressing issues to ensure compliance with inter- national sanctions and understanding and mitigating There is a risk that present US and/or EU the impact on Nynas. Nynas is in continuous dialogue sanctions targeting Venezuela and/ or their with authorities to prevent and mitigate unreasona- state-owned oil company PDVSA are further ble actions impacting Nynas. extended and affect Nynas’ business which could have an adverse effect on the Group’s operations, financial position and result.
Financial Risks Operating companies within the Nynas Group present Through its comprehensive and international operations, reports on their financial performance and economic Nynas is exposed to financial risks. The Board of Direc- status on a regular basis in accordance with internal tors is responsible for establishing the Group’s Finance reporting rules and the accounting policies applied by Policy, which comprises guidelines, objectives and limits Nynas, the International Financial Reporting Standards for financial management and the managing of financial (IFRS). The Group’s Finance function validates and risks within the Group. Financial risks comprise currency analyses the financial information as part of the quality risk, commodity risk, interest rate risk, financing risk, control of financial reporting. Please see Corporate liquidity risk, credit risk, tax risk and financial reporting. Governance for further information. The Nynas Group Treasury department has been established as the functional organisation in the parent Tax risks company where most of the Group’s financial risks Nynas is a multinational Group with many cross-border are handled. The function conducts internal banking transactions. Therefore, transfer pricing and indirect activities, with the primary task to control and manage taxes comprise two main areas that are the subject of the financial risks to which the company is exposed as investigations by the tax authorities of various countries. part of the company’s normal business activities, and At times, Nynas is involved in discussions with the tax to optimise the Group’s financial net. The Treasury authorities concerning transfer pricing issues, meaning department supports the subsidiaries with loans, cash the prices applied to transactions between Nynas compa- management, currency and hedge transactions. The nies globally. The Group maintains detailed transfer pric- internal bank also operates the company’s netting ing documentation to support the transfer prices applied. system and handles the Group’s cash management. If the tax authorities’ opinion in a transfer pricing matter Treasury operations also conduct payment advisory differs from Nynas’ position, this may have implications services and handle the Group’s credit insurance. for the Group’s revenue recognition among countries. Internal control & Financial reporting When deemed necessary, a provision for disputed taxes
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is recognised in accordance with the applicable financial • The County Administrative Board has decided that a accounting policies. For further information on current full environmental review is required for the capping, tax disputes, see note 29. For further information regard- thereby setting the date for the earliest possible time ing financial risks see note 27. for performing the capping to 2027 as it is turn- around dependent. ENVIRONMENTAL LEGISLATION • The County Administrative Board has granted per- During 2019 Nynas had three refineries under its own mission to use Vistar as feed. management – in Nynäshamn and Gothenburg in • The County Administrative Board has granted Sweden, and in Harburg Germany. The refining activ- permission to increase the number of ships used to ities require continual investments and environmen- unload bitumen. tal initiatives in order to reduce emissions to air and water as much as possible, and to eliminate the risk Gothenburg refinery, Sweden of accidents. The operations require permits and are Compliance and changes to environmental permits in subject to local environmental legislation. In Sweden 2019 were as follows: the environmental permits are regulated by the Land • The refinery is compliant with Best Available Tech- and Environment Court. niques (BAT) conclusions and the associated BREF In Harburg operations are regulated by several (BAT reference document) since the implementation permits acc. BImSchG /WHG which have been granted in October 2018. by the environmental authority of the city of Ham- • The environmental permit investigation regarding the burg. Nynas’ permits cover the production of bitu- characterization and proposed concentrations in the men, distillates and naphthenic specialty oils. Bitumen effluent water from the refinery, have been presented and distillates are produced at all Nynas refineries, to the Land and Environment Court in September. The while naphthenic specialty oils are produced at the Court ruling was received in November, stating the Nynäshamn refinery as well as the Harburg refinery. final conditions for the effluent water. The conditions In the process of implementing the Industrial Emis- were similar to the proposed conditions, set by Nynas. sions Directive (IED), BAT (Best Available Techniques) None of the authorities have appealed the verdict, conclusions for refineries were published in October hence the conditions set in the verdict are final. 2014 and the associated BREF (BAT reference docu- • All conditions stated in the environmental permit ment) was published in 2015. Nynas must demonstrate were complied with during 2019. compliance with the BAT conclusions within the four- year time limit from publication. Due to delay in the Harburg refinery, Germany legislation process in Germany the implementation of Compliance and changes to environmental permits in measurements has not yet been required by authori- 2019 were as follows: ties. Another IED requirement is to produce a baseline report on pollutants in the ground and groundwater • Preparation work for a new environmental contract in the areas in which the operations are located. The for the next 10 years has been finalised and a first baseline report will subsequently serve as a benchmark proposal was sent to the authority at the end of on the day that operations are closed down. Baseline 2017 as a first basis for the start of the negotiations reports have been submitted for all refineries. regarding content and necessary budget. Due to time constraints and other priorities by the authority no negotiations took place in 2019. Nynäshamn refinery, Sweden Compliance and changes to environmental permits in • Harburg applied for a new permit for the allocation 2019 were as follows: of cost free CO2 allowances for the fourth trading period starting in 2021. Finalisation of this allocation • Dredging of the P (safety dam) area was completed process is expected for 2020. in line with the permission granted by the Land • The permits for the installation of additional fixed and Environment Court in 2018 and was reported firefighting installations and the reduction of the in 2019. The report is now being reviewed by the staff of the fire brigade were received in December consulted authorities. 2018. Within collateral clauses a recalculation of the • E2 is a well-defined area with contaminated sediments capacity of the fire water system has been fixed. on the seabed outside the refinery. The Land and After modulation of the system, additional technical Environment Court has decided that Monitored Natural changes in the system are required. The changes Recovery is to be applied on the deeper parts of E2 and require an additional permit process. The application that the shallower parts are to be capped. Capping documents have been submitted to the authority. requires another decision by the Land and Environment • Emergency response plan still under preparation. Court which has not yet been applied for. Preparations The safety reports North and South have been for the capping have started and a consultation has updated and submitted to authority in 2019. been performed with the County Administrative Board • Application documents for the permit process, and adjacent operations during the year. permitting process for the bitumen vapour treat-
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ment for storage tanks and truck loading has been • On March 31, 2020, the shareholders converted the finalized, project in implementation. outstanding shareholder loan of EUR 119 million to • Permits for the prolongation of inner inspection of equity. distillate tanks from 5 to 10 years has been received • On April 3, 2020, OFAC extended the General for four tanks in order to reduce maintenance costs. License GL 13E until May 14, 2020. • As part of the crude flexibility initiative Harburg • On May 12, 2020, OFAC announced that Nynas is received the permit for operating of residues (Vistar). no longer being blocked pursuant to the Venezuela • F or the temporary cleaning of the amine system as Sanctions Regulations. As a result of a corporate restructuring of the ownership of Nynas AB sanctions a result of the decreasing performance of the sys- are lifted, and US persons and companies no longer tem a separate permit was necessary. The online require an authorization from OFAC to engage in cleaning worked well with good results. transactions or activities with Nynas AB. As a conse- • Permitting process for the replacement of furnace quence, general license GL 13E was removed. F-5401 in LHT-1 has been agreed with the authority. • On May 29, 2020, the Company has agreed with • Feasibility study for remediation of the PFT contam- the major creditors; the banks and the largest crude ination in the soil and groundwater of the refinery supplier to extend the maturity of their receivables finalised. Follow-up actions have to be agreed with until June 30, 2021. the authority next year. • On May 29, 2020, the board of Nynas AB (the “Company”) resolved to prepare a second control Depots and emulsion plants balance sheet based on going concern value and have it reviewed the Company’s auditor. Nynas operates several bitumen depots and emulsion • On May 29, 2020 a second shareholders control plants in Sweden. The handling of bitumen takes place meeting was held that decided to continue business in rigorously controlled and contained systems and operations. to minimise any possibility for leakage and/or injury • On June 15, 2020, the Court approved an extension an extensive HSSE&Q system including a crisis man- of Nynas company reorganisation for another three agement plan is in place. Nynas has its own depots months, until September 15, 2020. in Sweden and based on the volumes of bitumen • During 2020, the effects of Covid-19 have had a signif- handled, most of the depots have been assessed either icant negative impact on the Company’s ongoing busi- as B-facilities, which require permits under the Swedish ness operations mainly related to reduced sales volumes and production at the ERL refinery. If the Covid-19 environmental code, or as C-facilities, which are only effects continues for a long period of time, the effects subject to a notification requirement. Outside Sweden of it would continue to have a negative impact on the Nynas has bitumen or emulsion plants in countries Group’s operations,financial position and earnings and such as Denmark, Estonia, Norway, Poland and the it may become more difficult to raise capital, obtain UK. In most cases, Nynas is responsible for ensuring loans or other financings or service existing debt. compliance with environmental legislation in these • On 29 May 2020, Nynas AB booked impairment locations as well. losses in the ordinary accounting as per 2020-03-31 of SEK 694 million related to tangible assets (based FUTURE OUTLOOK on a WACC of 9 per cent). An impairment gain With the now confirmed sanctions relief from OFAC, of SEK 800 million was adjusted for in the control both Nynas and the administrators believe that the basis balance sheet dated 29 May 2020 related to invest- exists for finalising the ongoing reorganisation success- ments in subsidiaries. fully. Having exited sanctions Nynas will be able to return • On 29 May 2020, Nynas AB booked impairment loss to normal trading conditions, secure long-term financing in the ordinary accounting as per 2020-03-31 of 328 and necessary crude oil purchases going forward. MSEK due to significant decrease in crude oil prices compared to December 2019. Significant events after the fiscal year • On January 7, 2020, the banks produced an addi- Forecast tional unilateral set-off statement and approximately Nynas does not present a financial forecast. SEK 0.3 billion standing to the credit on some of Nynas AB’s accounts held by the Banks was applied PROPOSED DISTRIBUTION OF PROFIT towards partial payments of the Bank’s receivables. The Board proposes that the available profits of SEK • On January 24 ,2020, the Court decided at the Cred- 191,634,137 in the Parent Company be distributed as itor meeting that the reorganization should continue follows: according to plan until March 13, 2020. Total dividend 0 • On March 20, 2020, the Court approved an exten- sion of Nynas company reorganisation for another Carried forward 191,634,137 three months, until June 15. SEK 191,634,137
20 NYNAS ANNUAL REPORT 2019 SUSTAINABLE DEVELOPMENT REPORT
Sustainable Development Report
This report addresses the requirements regarding ber of policies that address the environmental, non-financial reporting as specified in the Swedish economic and social aspects of sustainable develop- Annual Accounts Act (Årsredovisningslagen). The ment. These policies collectively steer Nynas’ corporate report covers all Nynas entities which are wholly responsibility approach and include: owned by Nynas Group. For further information • The Code of Conduct regarding Nynas Group companies, see note 14. • Competition Compliance • Global Anti-bribery and Anti-corruption Most oil companies turn their crude oil into fossil fuels, • Health, Safety, Security, Environment and Quality which are then burned. Nynas transform crude oil into (HSSE&Q) high quality bitumen and naphthenic specialty oils • People and Human Rights that bring long-term value to our customers in a wide • Procurement variety of applications. In 2019 Nynas participated in the work on a road- Nynas is certified according to ISO 9001, ISO 14001, map for the Swedish petroleum and renewable fuel OHSAS 18001 and ISO 50001 in the UK and Germany. industry to support a climate neutral Sweden. The roadmap predicts that the amount of fossil raw mate- Sustainable development governance rials for fuel production will decrease to a large extent Nynas’ sustainable development governance aims but that it will be critical also in the future for products to manage sustainable development matters in an like bitumen for use in asphalt, insulating oils for elec- integrated way across the company. Sustainable devel- trical transformers and other specialty products. opment is the responsibility of the Nynas Executive Nynas believes that our products contribute to Committee. A sustainable development network, con- sustainable development even if produced from fossil sisting of representatives from all major businesses and raw material. Nynas recognizes the need to continue functions within Nynas, drives the sustainable develop- innovating and developing products that lower the ment ambitions further throughout the company and environmental impact looking at their whole lifecy- to advise the Nynas Executive Committee on matters cle and we continue to work with measures such as of sustainable development. energy optimisation and reduction of transport emis- sions to limit our carbon footprint. Materiality assessment including stakeholder dialogue SECURING THE FUTURE AND CREATING VALUE Nynas has performed a materiality assessment to Nynas’ sustainable development ambition is formu- understand the views and expectations of our stake- lated as “securing the future and creating value,” with holders, including internal stakeholders and external the goal to protect and create long-term economic key stakeholder groups – primarily customers, share- and brand value for the company and its stakeholders. holders, authorities and the communities close to Nynas aims to do this through proactively contributing Nynas operations. The result of the materiality assess- to sustainable development by demonstrably improv- ment is presented in a matrix, where the material ing the impact of its economic, environmental and topics are identified (illustration page 22). sustainable social activities. Nynas’ commitment to sustainable development report focuses on the most material development is reflected in the company’s business topics for Nynas and our stakeholders. governance and through the group-wide sustainable development policy. SUSTAINABLE DEVELOPMENT FOCUS AREAS Environment Policies driving our sustainable Risks related to the environment are described in the development approach Risk Management section in the Board of Directors’ The sustainable development policy is linked to a num- report.
21 NYNAS ANNUAL REPORT 2019 SUSTAINABLE DEVELOPMENT REPORT
Climate Product change uality Sustainability Issues performance High I
Environmental People and Safety ste ardship Security of supply
Human Community labour rights Optimising Rene able the barrel Process supply safety Products Supply Chain edium I transport Community safety development
Human Environment resources Land
Stakeholder Interest anagement Business Personal health Ethics Lo I 3 ethics safety
Results of materiality assessment referred to on previous page. Impact on Nynas
Lo I 3 edium I High I
Nynas is addressing all areas in the matrix while prioritising those that require additional focus, for instance climate change and product quality and performance.
Nynas is consistently working to improve environmen- free allocation regarding CO2 within the EU Emission tal performance and secure compliance with all legal Trading Scheme (ETS) Carbon Market. and other demands. Below are the main measures taken during 2020. Environmental measures at the Nynäshamn refinery in Sweden Climate change The refinery in Nynäshamn manufactures bitumen and Climate change was identified as an area of high naphthenic specialty oils. The following initiatives and impact/high interest in the materiality assessment. actions were taken in 2019: Nynas has started tracking its organisational carbon • Dredging of contaminated sediments in the area P footprint with an operational control footprint bound- (safety dam) was finalised during 2018, in line with ary, scope 1 and 2. the decision by the Land and Environment Court. We have adopted the Greenhouse Gas (GHG) The outcome of the dredging was reported to the Protocol, Corporate Standard for evaluating Nynas’ Land and Environment Court during the year and the organisational carbon footprint and have an ambition report is being reviewed by the consulted authorities. to establish a company-wide procedure to routinely The process for the choice of methodology for treat- measure the carbon footprint within the Nynas organi- ment of the sediments, as well as for the remedia- sation, based on the GHG Protocol. tion of the contaminated area of J3/J4, is ongoing in line with the legally binding decision in the Land and Impact of environmental legislation Environment Court. The Swedish refineries have implemented full com- • The plan for final covering of the Landfarmen landfill pliance with Industrial Emissions Directive (IED) BAT is under consultation with the County Administrative conclusions from October 2018. board. The BAT conclusions for refineries in Germany were • The parole period regarding the contaminated transferred into different German laws in 2018. Due to area with sediments, called E2, was finalised and the delay in in the transformation process, several new processed in the Land and Environmental Court due dates for full compliance have been set in with the in 2018. The Court decision from November 2018 different legislations. The implementation of the most implies capping the contaminated sediments in the relevant issues requires a formal act by the authorities shallower area. For the contaminated sediments in (legal order), which still has not been granted by the the deeper parts of the sea, the applied method will authority. This step is expected as part of the permitting be Monitored Natural Recovery (MNR). Preparations process for the replacement of the furnance in LHT-1 for the capping have started and a consultation has Additionally, a revised legislation “TA Luft” (Clean Air been performed with the County Administrative Act) is expected to be issued 2020, which will have a Board and adjacent operations during the year. significant impact on all German industrial units. • A turnaround for the entire refinery was performed The refineries have submitted the application for during 2019. Some of the changes performed during the forthcoming “The fourth period 2021–2030” of the turnaround were:
22 NYNAS ANNUAL REPORT 2019 NYNAS ANNUAL REPORT 2019 SUSTAINABLE DEVELOPMENT REPORT SUSTAINABLE DEVELOPMENT REPORT
• Installation of a flow meter to ensure compliance Products and Supply Chain with BAT 56, as agreed with the County Adminis- The risks related to the area of Products and Supply trative Board. Chain are mainly related to environment, health and • Conversion to natural gas feed for the flare pilots product safety. These risks are described in the Risk
and some furnaces, thereby reducing CO2 emis- Management section in the Board of Directors’ report. sions and facilitating start up processes. • Installation of tie-ins in preparation of increasing Product quality and performance and Renewables oil recovery, thereby reducing the load on the Product quality and performance is strongly linked to waste water treatment plant and increasing effi- the Nynas motto “Taking oil further” and was identified cient use of raw materials. as one of the main topics in the materiality assessment. The Nynas product benefits, and their contribution to Environmental measures at the Gothenburg sustainable development through different applications, refinery in Sweden in both Bitumen and Naphthenics, can largely be cap- The refinery in Gothenburg manufactures bitumen and tured in six key aspects: lifetime, efficiency, recyclability, distillates. The following initiatives and actions were social, product health & safety and renewables. The taken in 2019: three first aspects are connected to lifecycle value and linked to resource and energy efficiency and a circular • The plan to install a new furnace for the 2021 sea- economy. When looking at any product, the impact son, have been approved. The new furnace will run over its whole lifecycle while in use is important, not on natural gas compared to the current one which only at the impact from its production. This whole life runs on fuel oil. The higher efficiency and the change cycle impact can be a significant share depending on of fuel in the new furnace, will reduce the CO emis- 2 the application but can be reduced further if the prod- sions from the refinery. uct, after being in service, can be reused or recycled. • Measures were taken to reduce the chemical oxygen Social value is mainly contributed to through demand (COD), in the rock cavern water treatment. products that are used in infrastructure such as roads, • The insulation of tank 544 has been renewed, and construction and electricity grids, as well as products the overall insulation of the steam system within the contributing to improved living standards. large tank park has been improved. Nynas adheres to laws and regulations for our • An energy mapping study, and performance evalua- products and monitors legislation related to intended tion of steam traps were conducted. main applications. • The energy plan has been approved without demand Renewables was merged with product quality and on further actions from the County Administrative performance as it was identified as an area to be Board. further investigated. This also signals the expectation that any renewable solution should also contribute to Environmental measures at the Harburg quality and performance in the intended application. refinery in Germany The refinery in Harburg manufactures bitumen, med- Some examples of product developments in 2019 ical white oils and naphthenic specialty oils. In 2019, This year, Nynas has launched several new products Nynas received the permit for operating other feed- with a positive contribution to sustainable development. stocks (fuel oil). Nynas proposed measures for a new Further, as the awareness and interest in benefits in this environmental contract for the next 10 years in 2017, area from Nynas’ products are continuously increasing, but that process has not been finalized until now. several projects - own and jointly with customers - have Despite the lack of an actual environmental contract been launched to study and quantify the benefits. in place, the following measures were implemented in Naphthenics launched their first ever renewable 2019 products NYTRO® BIO 300X and NYTEX® BIO 6200 • A feasibility study for the remediation of PFC con- for the electrical and tyre industries, respectively. The tamination in the groundwater has been finalised at NYTRO BIO 300X is a high performance, fully bio- the end of 2019. based and readily biodegradable transformer fluid. It • A bitumen vapour treatment project, to reduce emis- fully meets the IEC 60296 specification and comple- sions with a strong odour from the bitumen area has ments the Nynas broad high-performance transformer been permittted and is in implementation phase. oil products portfolio, where also all products are fully • Legionella monitoring for cooling water systems recyclable. The NYTEX 6200 is a bio-based tyre oil according new requirements (42 BImSchV) has been delivering the same low rolling resistance profile that is successfully implemented. typical for all Nynas tyre oils. Both products have been very well received by customers. Environmental data for the Nynas refineries can be The Nyflex® 2120B, a hydrotreated, virtually non-ar- found on the Nynas website. omatic, low viscosity naphthenic oil conforming to the US FDA §178.3620 (b) was introduced as solution for
23 NYNAS ANNUAL REPORT 2019 SUSTAINABLE DEVELOPMENT REPORT
silicone sealants and heat set inks. It combines very This means available crudes and other feedstock options high purity with excellent formulation compatibility in are continuously monitored and assessed in accordance the two applications. Nynas® S3B, a virtually non-ar- with the Nynas product slate quality requirements. Pilot omatic, low viscosity FDA §178.3620 (b) conforming and full-scale test runs are conducted when motivated. base oil was introduced as solution for metalworking At the end of 2019 this continuous work proved to fluids and lubricants. Also here the purity and a flash be invaluable. With the abrupt demand to move away point above 100oC are key aspects of the product. from Venezuelan crude, intense work was immediately In close cooperation with customers, Naphthenics started to fully transition to an alternative crude and has this year also developed an oil for industrial wood feedstock base for all refineries. This work is done in preservation, which is driven by a phasing out of cre- tight cooperation between the supply chain, refineries osote due to its hazard classification. The oil provides and technical development teams. an efficient moisture barrier and functions as carrier of active components. Another customer cooperation People and Safety has at commercial scale quantified the benefits from Risks related to the area of People and Safety are mainly Nynas® T600 in grease, both regarding the reduced related to health, safety, human resources and human lithium soap consumption and the reduced energy use and labour rights. These risks are described in the Risk when producing the grease in a pressurized kettle. Management section in the Board of Directors’ report. Nynas Bitumen has this year seen the initiation of several studies. Bitumen is a partner in an innovation Health and Safety project sponsored by Sweden’s Innovation Agency, Nynas promotes a strong health and safety culture. Vinnova, with the aim to develop a method to reduce Line management is responsible for promoting this the carbon footprint of asphalt production and laying culture and all employees and contractors are respon- to zero. Also, a joint research program with (one of) sible for contributing to health and safety in their work the world’s largest asphalt road contractors, has been activities. These policies are applicable within this area: launched. The objective is to establish which key • H ealth, Safety, Security, Environment and Quality bitumen properties contribute to asphalt pavement (HSSE&Q) policy durability. The aim is to analyze recovered bitumen • Preventive Health Care policy properties from pavements in around 10 different • Travel & Security policy European countries. Better bitumen durability can • Alcohol and Drugs policy result in increasing asphalt pavement lifetime and therefore reduce the climate impact of asphalt road Nynas has also implemented a number of Group construction materials. The asphalt rejuvenator Nygen minimum requirements. During 2019, several of the 910 is included in a Flemish research project “Rejuve- Group minimum requirements were updated and more bit” that looks into the benefits of asphalt reuse with stringent demands were placed on the organisation. rejuvenators, including a full Life Cycle Analysis. Nynas’ health and safety culture is maintained through Nynas is also chairing a new sustainability initiative many efforts, including the Observe, Think and Act pro- in Eurobitume, the European bitumen association. gramme, preventive health care, regular safety report- Both the Naphthenics and the Bitumen businesses ing, and safety tools. The Observe, Think and Act safety have continued the R&D work around renewable compo- programme is compulsory for all employees and con- nents. Bitumen has conducted promising field trials with tractors. It focuses on safe behaviour, being observant bitumen containing biogenic carbon components, includ- of potential risks and knowing how to mitigate them. ing positive indications that these asphalt road pave- The programme includes Health, Safety, Security, Envi- ments are fully reusable, which is critical for reducing the ronment (HSSE) meetings at all levels, safety workshops climate impact of asphalt. Naphthenics work in several and newsletters translated into local languages. In 2019, projects assessing potential new sustainable solutions the focus was to turn the trend on TRIs and special and their applicability in select customer applications. focus was put on the Turn Around in Nynäshamn. Recognising that sustainable development impacts all stakeholders and is generating increased interest Health and Safety monitoring and focus from our customers, we will continue to Transparency and reporting of incidents is encouraged integrate it as an aspect in our knowledge and product through a “no blame” approach that contributes to development work in parallel with technical and other learning and making improvements regarding safety. performance demands. Nynas monitors its safety performance monthly to help with continuous improvement. Three main areas – Per- Optimising the barrel and security of supply sonal Injuries, Process Safety Accidents and Transport Nynas’ operational stability is dependent on securing the Accidents – are monitored. Each incident is recorded, availability of the right feedstocks and ensuring that the and serious accidents are investigated so corrective and crude processed is utilised to the maximum in high-value preventive actions can be taken. In 2019, Nynas renewed products, while waste and fuel streams are minimised. the efforts to train own staff as Lead Investigators, being
24 NYNAS ANNUAL REPORT 2019 NYNAS ANNUAL REPORT 2019 SUSTAINABLE DEVELOPMENT REPORT SUSTAINABLE DEVELOPMENT REPORT
TOTAL RECORDABLE INJURY PROCESS SAFETY ACCIDENTS FREQUENCY (TRIF) TRANSPORT ACCIDENTS RATE (PSA)
Total recordable injuries per Process safety accidents per million working hours million working hours 6 25 0.5
5 20 0.
15 0.3 3 10 0.2 2
5 0.1 1
0 0 0.0 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015* 2016* 2017* 2018 2019
*Zero PSAs 2015, 2016 and 2017
able to do full root cause analyses of both accidents and to ensure the company will have enough technical near misses with high potential. Besides the incident competence now and into the future. reporting system, Nynas also follows up through regular Career incentives are offered to employees through safety walks and inspections, sick leave statistics, ran- various career ladder programmes such as the special- dom alcohol and drug tests, ergonomic inspections and ist career programme, leadership development pro- an annual report on employee health checks. grammes, and other training opportunities. Nynas has In response to the negative development on several global procedures in place to ensure we follow TRI during 2018, Nynas implemented a number of Nynas values, policies and legal requirements through- measures, including extra safety meetings, updates out the employee lifecycle. New employees are intro- of minimum safety requirements and the sharing of duced to the company through an onboarding process information and learning from best practices. In 2019, including introduction programmes to get acquainted the Total Recordable Injury Frequency (TRIF) score with the business areas and functions. The exit process for Personal Injuries improved significantly versus the includes assessment of feedback from employees who outcome 2018 and the full year frequency of 2.2 is leave the company. Nynas monitors employee progress the best frequency in the history of Nynas. All areas through an annual performance appraisal process. It of Nynas performed well during the year but Harburg monitors the company’s attractiveness and employee performed very well and managed 2019 TRI-free. satisfaction through a biannual employee survey. The During the year there was one Process Safety employee participation is high, normally around 90%, Accident Tier 1 and three Tier 2 which was according indicating a high level of engagement within the to target. As a result of Nynas’ strong commitment company. Nynas follows up on the feedback from each to working intensely on best practices, for example survey through workshops and action plans. related to the loading and filling of bitumen and oils in An important part of the strategy to attract talent transport vehicles, the trend towards fewer Transport includes different programmes to bring in students at Accidents continued in 2019 and the result was at the various levels to the company. Since 2017 the Nynäshamn target level. Nynas benchmarks its Transport Accidents refinery runs a programme called NyEx to prepare and with figures from the European Chemical Transport attract young chemical engineers. The program allows Association (ECTA). It benchmarks its Personal Injuries new graduates the opportunity to try working within Pro- and Process Safety Accidents with the European cess Technology, Engineering and Process Technical Ser- downstream oil industry safety performance reported vices, and gain broad knowledge about the operations. in Concawe and its ambition is to be better than the Onsite training for operators has also been developed industry average. and NyTech, an apprentice programme for operators, started in 2018, both have been proven successful. Human Resources The Harburg refinery runs its own trainee pro- Nynas aims to be an attractive employer by offering gramme, named Berufsausbildung, to offer professional competitive salaries, career opportunities, international training and new opportunities for young people. work experiences and training. A part of the Nynas Nynas is thus able to secure qualified staff for its highly strategy is to attract and retain talent and ensure the technical chemical operations and be perceived as an company has the right competence long-term. Nynas attractive employer. Nynas has received an award for works with apprentice programs and trainee programs its excellent apprentice trainee programme (Ausgeze- in the communities where it operates and offers also ichneter Ausbildungsbetrieb 2017) from the Hamburg on-the-job training for recent graduates and others, Chamber of Commerce. Nynas also offers opportunities
25 NYNAS ANNUAL REPORT 2019 SUSTAINABLE DEVELOPMENT REPORT
for university students and graduates such as intern- • EU, US and UN sanction regimes. Nynas conducts regu- ships through a collaboration with the nearby Hamburg lar mandatory training for certain identified employees, University of Technology (TUHH). In Gothenburg, Swe- on how to comply with anti-bribery, anti-corruption, den, Nynas collaborates with Chalmers University of competition and trade regulations, along with other Technology and its Chemical Engineering Programme. policy compliance training. The identified employees An apprentice programme for operators was started in are also required to sign a yearly undertaking confirm- 2018 to ensure the availability of well-trained operators. ing they will comply with the Nynas Code of Conduct The program has been very successful. and its underlying policies. Nynas does continuous monitoring to ensure that the identified employees Human and Labour Rights Risks have received training and signed the compliance The Nynas Code of Conduct clearly states: “We undertaking. Nynas has an informal whistle-blowing shall never be influenced in our decisions, actions or process with an external party for cases of possible recommendations by issues of gender, race, creed, non-compliance. Suppliers are expected to comply colour, age, political views or any other areas of with the Nynas Code of Conduct and policies, as stated possible discrimination.” Nynas’ People and Human in the terms and conditions of their agreements. Rights policy, which complies with the UN Declaration of Human Rights, supports this. As a global company, Community Nynas has a diverse workforce, with employees from Risks related to the area of Community are mainly different countries and backgrounds. Nynas encour- related to the environment and human resources. ages diversity in its policies and programmes, such as These risks are described in the Risk Management leadership training for women, to improve the gender section in the Board of Directors’ report. balance and improve the company’s competitive edge, Nynas is involved in community activities as part of its knowledge and capacity to tailor products to customer ambition to “secure the future and create value.” Being needs. Nynas works to mitigate risk through regular a good corporate citizen is of the highest importance for meetings and collaboration with safety committees, every Nynas production site and Nynas promotes trans- local trade unions and executive management. New parency and encourages open dialogue and engage- employees are introduced to the Nynas Code of ment with all stakeholders, especially its neighbours. Conduct in the employee onboarding process, which Nynas has been operating a refinery in Nynäshamn, addresses human and labour rights and the preven- Sweden, since 1928, and is the largest private employer tion of human rights abuses such as discrimination in the area. With the initiative “Good Neighbour” and harassment in the workplace. Workshops on how Nynas aims for transparency by establishing a dialogue to handle harassment, developed and implemented with politicians, municipality officials, teachers and through HSSE groups within the Nynas Group, are others living in Nynäshamn through regular informa- performed on a regular basis. Issues related to human tion, invitations to visit the refinery, and participation resources, including human and labour rights, are in different councils and meetings. Nynas is also a monitored partly through our bi-annual employee member of the local Nynäshamn business committee. survey. Those areas with low scores are addressed and Nynas conducted a survey in Nynäshamn in November followed up on with an action plan for improvement. 2019 to find out how the Nynas refinery is perceived locally. Interviews with a representative sample of the Ethics population living near the refinery showed that Nynas Risks related to the area of Ethics are mainly related to is regarded as an attractive workplace and that three anti-trust, anti-bribery and anti-corruption. These risks out of four are positive towards that an oil refinery is are described in the Risk Management section in the located in the municipality. The survey is repeated every Board of Directors’ report. two years to give a clear indication of which issues The Nynas Code of Conduct clearly establishes the need to be addressed. rules of ethical business behaviour for Nynas employ- The Gothenburg refinery collaborates with Chalmers ees and partners in relation to bribery, corruption, con- University of technology through a programme focus- flicts of interest and other areas where the company ing on chemical products from a sustainability per- could be at risk. The Code of Conduct has supporting spective. Study visits and support to student projects policies for competition, procurement, anti-bribery, are also in focus. The refinery takes an active part in anti-corruption and trade, among others. external networks, focusing on sharing best practices Nynas aims to comply with laws and regulations in related to personal and process security. every jurisdiction where it operates, including: Harburg refinery has a cooperation with Technical University Hamburg-Harburg (TUHH). Study visits and • A nti-bribery and anti-corruption laws, including the support to student projects/thesis works are also in UK Bribery Act and the Foreign Corrupt Practices Act; focus. The refinery works with neighbouring compa- • Competition laws, including EU and US competition nies in cooperation on flood protection and emer- laws; gency response.
26 NYNAS ANNUAL REPORT 2018 CORPORATE GOVERNANCE
Corporate Governance
Corporate Governance at Nynas comprises guide- Shareholders lines, structures and processes, through which Nynas AB, company reg. no, 556029-2509, domiciled the Group is managed and controlled. The aim is in Stockholm, since May 6, 2020 owned 49.999 per to ensure efficient and value-creating decision cent by Neste AB, company reg. no. 556232-3906, making by clearly specifying the division of roles domiciled in Stockholm, Sweden, 35.003 per cent by and responsibilities between the Shareholders, NyColleagues AB, company reg. no. 559247-2418, the Board and the Group Executive Committee. domiciled in Stockholm, Sweden and 14.999 per cent Corporate Governance is based on the Swedish by PDV Europa B.V., company reg. no. 27133447 domi- Companies Act, applicable parts of the Nasdaq ciled in The Hague, the Netherlands. Stockholm Stock Exchange Rules, and in all Neste AB is part of a Group in which Neste Oyj, material respects the Swedish Corporate company reg. no. FI 18523029, Espoo, Finland, is Governance Code. the Parent Company. NyColleagues AB is owned by
Governance structure of Nynas AB
Shareholders via the Audit Committee Annual General Meeting Monitors the Company’s financial accounting and The Company’s supreme decision-making reporting. Reviews the internal control system. authority. Adopts the approval of the Annual Report, discharge of responsibility, distribution Auditor of profit, changes to Articles of Association Audits the Company’s and elects Board of Directors and Auditors. Incentive Compensation Annual Report, book- Committee keeping, management Monitors the terms of compensation and and internal controls. Board Of Directors employment of the CEO and senior executives. Reviews proposed major personnel and Considers and adopts decisions on overall organisational changes. issues concerning the Group and oversees the work of the CEO.
Project Review Committee CEO Prepares decisions of the Board of Directors Manages the Company on the basis concerning major strategic and structural projects of the internal and external corporate and thereafter monitors the implementation and governance instruments. achieved results of the projects.
Business areas / functions
Important external instruments Important internal instruments Policies adopted by • Swedish Companies Act • Articles of Association the Board of Directors • Swedish Bookkeeping Act • Working procedures for the • Finance policy • Swedish Annual Accounts Act Board of Directors • HSSE&Q policy • IFRS • Internal management system • IP policy • Environmental permits • Information policy
27 NYNAS ANNUAL REPORT 2019 CORPORATE GOVERNANCE
Nynässtiftelsen, reg. no. 802481-5071, a foundation Working procedures govern the work of the Board domiciled in Stockholm, Sweden. PDV Europa B.V, is of Directors, as well as the division of responsibility part of a Group in which Petróleos de Venezuela S.A., between the Board of Directors and the CEO. The company reg. no. 73023, Caracas, Venezuela, is the Board of Directors monitors the work of the CEO via Parent Company. on-going follow-up of the activities during the year. It The total number of shares issued is 67,532, of is the responsibility of the Board of Directors to ensure which 33,765 are Class A shares, 10,129 are Class B that effective systems are in place for follow-up and shares and 23,638 are Class C shares. The share capital control of the Company’s activities, that there are sat- is SEK 67.5 million and the listed value is SEK 1,000 isfactory internal control procedures, and that internal per share. One share entitles one vote at Annual and Corporate Governance instruments have been deter- Extraordinary General Meetings. There are no restric- mined. The responsibility also includes determining the tions to the number of votes that each shareholder objectives and strategy, deciding on major acquisi- may cast at General Meetings. Nynas’ new articles tions and divestments of companies, or other major of association adopted at a shareholders’ meeting investments, deciding placements and loans, and to on May 6, 2020 have been submitted to the Swedish adopt the Company’s Finance Policy. In addition to Companies Registration Office for registration. the constituent meeting the Board of Directors holds The shareholders’ Annual General Meeting is the at least three ordinary meetings per year. In 2019 four Company’s highest decision-making authority where ordinary Board meetings were held and in addition the shareholders right to adopt decisions concerning thereto a number of extraordinary meetings. In addi- Nynas’ affairs is exercised. The Annual General Meet- tion to approval of budgets and necessary investment ing is usually held in the second quarter of the financial projects, the work in 2019 focused on managing and year. If necessary, Extraordinary General Meetings may mitigating effects of sanctions as well as continued be convened. The Annual General Meeting adopts work on strategic and structural issues. the Articles of Association and the shareholders elect The CEO presents issues to the Board of Directors the members of the Board of Directors at the Annual and states the grounds for the proposed decisions. General Meeting. Other Group officers attend meetings of the Board The Annual General Meeting also elects the audi- of Directors as required in order to present particular tors and makes decisions regarding their remuneration. issues. In order to fulfil its obligations more effectively The Annual General Meeting adopts the resolutions the Board of Directors has established three commit- to approve the Income Statement and Statement of tees from among its members: the Audit Committee, Financial Position, the distribution of the Company’s the Incentive Compensation Committee and the Proj- profits, and the responsibilities of the members of the ect Review Committee. Board of Directors and the CEO. • The objective of the Audit Committee is to represent the Board of Directors and to monitor the Company’s Board of Directors financial reporting, and to monitor the effectiveness The composition of the Board of Directors of the Company’s internal controls, internal audit The Board of Directors consists of a minimum of and risk management. The Committee must keep three up to a maximum of seven with up to a maxi- itself informed of the audit of the Annual Report mum of six deputies, and two employee representa- and the Consolidated Annual Report, review and tives (with two deputies). Of the ordinary members monitor the impartiality and independence of the and deputy members, who shall all be elected at a auditors, and assist in the preparation of proposals Shareholders’ Meeting, owners of class A shares shall for the Annual General Meeting’s decision on the be entitled to appoint three ordinary members (and election of auditors. The Audit Committee must three deputies), the owners of class B shares one also represent the Board of Directors by supporting member (and one deputy), and the owners of class C and monitoring the Group’s work on the overall shares two members (and two deputies). The chair- coordination of the Group’s risk management. The man of the board is elected by the Shareholders’ results of the Audit Committee’s work in the form Meeting. The CEO is not a member of the Board of observations, recommendations and proposed of Directors. decisions and measures must be reported to the Board of Directors on an on-going basis. In 2019, The work and responsibility of three meetings were held. the Board of Directors The Board of Directors is responsible for the organi- • The objective of the Incentive Compensation sation of the company and the administration of the Committee is to represent the Board of Directors company’s affairs. The framework for the work of the in matters concerning the terms of compensation Board of Directors is the documented working proce- and employment of the CEO, and the executives dures of the Board which are adopted annually by the reporting directly to the CEO, on the basis of the Board of Directors. principles adopted by the Annual General Meeting
28 NYNAS ANNUAL REPORT 2019 NYNAS ANNUAL REPORT 2019 CORPORATE GOVERNANCE CORPORATE GOVERNANCE
and the policies adopted. The Committee also on an on-going basis. The CEO is assisted by a Group reviews proposed major personnel or organi- Executive Committee that consists of the executives sational changes. The Incentive Compensation responsible for the business areas and staff functions. Committee must report on its work to the Board Nynas has a structure with strong focus on business of Directors on an on-going basis. In 2019, three responsibility, combined with support from shared meetings were held. Group functions and processes. The CEO leads the work of the Group Executive Committee and adopts • The objective of the Project Review Committee is to decisions in consultation with the other executives. review proposals from the Company’s management At the close of 2019 there were nine members of the concerning major strategic and structural projects. Group Executive Committee. The Group Executive The Committee also follows up and approves the Committee meets one to two times per month to implementation of specific projects as determined consider the Group’s financial development, Group by the Board of Directors. The Project Review development projects, management and competence Committee must report on its work to the Board of provision, and other strategic issues. Directors on an ongoing basis. The Committee did not hold any meetings in 2019. Group Treasury Group Treasury is established as the functional Auditors organisation in the Parent Company where most of External auditor the Group’s financial risks are handled. The function’s At the 2019 Annual General Meeting the authorised primary task is to contribute to value creation by public accounting firm Ernst & Young AB was elected as managing the financial risks to which the Company the Company’s external auditor up to and including the is exposed in its normal business activities. To sup- 2020 Annual General Meeting. The auditor in charge is port the work of handling risk exposure the CEO has Rickard Andersson, Authorised Public Accountant. appointed a Hedging Committee. The Committee is The audit is reported to the shareholders as an Audi- chaired by Nynas’ CFO and also includes other mem- tors’ Report. This constitutes a recommendation to the bers with knowledge and understanding of Nynas’ shareholders for their decision at the Annual General business model. Meeting whether to adopt the Income Statements and Statements of Financial Position of the Parent External Corporate Governance instruments Company and the Group, the distribution of the profit The external Corporate Governance instruments of the Parent Company, and whether to discharge the that determine the framework for Nynas’ Corporate members of the Board of Directors and the CEO from Governance consist of the Swedish Companies Act, their responsibilities for the financial year. The audit Annual Accounts Act and other relevant acts. The is conducted in accordance with the Swedish Com- Swedish Corporate Governance Code must be applied panies Act and good auditing practice, which means by Swedish limited liability companies whose shares that the audit is planned and performed on the basis are listed in a regulated market. Nynas’ ownership of knowledge of the activities, current development structure therefore does not require the Company to and strategies of the Nynas Group. The audit services, observe the Code. Good Corporate Governance is among other things, include inspection of compliance fundamental to Nynas, and the objective is to ensure with the Articles of Association, the Companies Act solid and adequate Corporate Governance of the and the Annual Accounts Act, as well as the Interna- Company. tional Financial Reporting Standards (IFRS). Nynas AB is not a listed public limited company and The audit is furthermore reported on an ongoing therefore not required to comply with the Swedish basis in the course of the year to the Board of respec- Corporate Governance Code, however in all material tive company and to the CEO and Executive Commit- aspects Nynas adheres to the Code with the following tee of the Group. See Note 7 concerning the remuner- exceptions in section III, Rules for Corporate Gover- ation paid to the auditors. nance:
CEO and Group Executive Committee The shareholders’ meeting The Managing Director of Nynas AB, who is also the Sub sections 1.3 and 1.4: Nynas does not have a Group President and CEO, manages Nynas’ activities nomination committee as the two sole shareholders in accordance with the external and internal Corporate independently nominate their respective Board mem- Governance instruments. The framework consists of bers. Both shareholders have internal processes in their the annually stated working procedures for the Board own Boards and provide Nynas with their respective of Directors, which also defines how responsibilities nominees. The two shareholders participate with are divided between the Board and the Chief Executive their appointed representatives at the Annual General Officer. The CEO is responsible for and reports on the Meeting. development in the Company to the Board of Directors
29 NYNAS ANNUAL REPORT 2019 CORPORATE GOVERNANCE
Sub section 1.7: Minutes of the Annual General Meet- petition legislation, policies that prohibit bribery and ing and subsequent Extraordinary Meetings are not corruption, policy on people and human rights, policy posted on Nynas’ website as the shareholders agree on information management and policy on health, they have sufficient access to all minutes and further safety, security, environment and quality. relevant information. Internal control of financial reporting Appointment and remuneration of the Board The financial statements are established in accordance and the statutory auditor with prevailing legislation, International Financial Sub section 2: Nynas does not have a nomination Reporting Standards (IFRS) as adopted by the EU and committee since the shareholders have agreed to dis- the listing agreement with Nasdaq Stockholm. This cuss nominations and related matters directly between description of internal control over financial reporting themselves thereby performing the same function. has been prepared in accordance with the Annual Accounts Act and constitutes an integrated part of the The size and composition of the Board Corporate Governance Report. Sub section 4.6: As a consequence of the fact that Nynas does not have a nomination committee it cannot Control environment technically comply with this section that describes The CEO of Nynas regulates the governance of the which information is to be provided to the nomination Nynas Group. It includes the Nynas Code of Conduct, committee. delegation of responsibilities, including signatory and authorisation principles for decision making and cost Evaluation of the Board of Directors approvals, and request and approval procedures in and the Chief Executive Officer regards to investments and acquisitions, among other Section 8: Regular and systematic evaluation of the items. performance of the Board is not done. The evaluation The Nynas Financial Reporting Manual and Proce- of Board members is carried out independently by dures govern control over financial reporting. These the respective shareholder as each shareholder has its documents contain detailed instructions regarding internal processes for performance evaluation of their accounting policies and financial reporting procedures respective Board members. Subsequently, the chair- to be applied by all Nynas reporting entities. In the man or the vice chairman of the Board discusses the major countries where Nynas operates, Finance or outcome with the individual Board members. Accounting Managers are appointed to support local management and the finance organisation and to Remuneration of the Board and Executive Management provide a link between reporting entities and Group Sub sections 9.7 and 9.8 are not applicable since Finance. At group level, Group Financial Control man- Nynas does not have a share incentive scheme. ages the reporting process to ensure the complete- ness and accuracy of financial reporting and compli- Information on Corporate Governance ance with IFRS requirements. Group Business Control The rules in sub section 10 regarding information on performs business analysis and compiles reports on Corporate Governance are only relevant to companies operational performance. Both statutory and man- whereby the shares are listed; hence the rules are not agement reporting is conducted in close cooperation applicable to Nynas. with business areas and specialist functions such as tax, treasury and legal to ensure the correct reporting Internal Corporate Governance instruments of the income statement, balance sheet, equity and The binding internal Corporate Governance instru- cash flow. ments are the Articles of Association adopted by the Annual General Meeting and the Working procedures Control activities for Nynas’ Board of Directors adopted by the Board Internal Control activities have been affected in all of Directors, the instructions for the CEO of Nynas, areas that impact upon financial reporting. The inter- instructions for the financial reporting to the Board of nal control activities follow the logic of the reporting Directors, the instructions for the committees nom- process and the finance organisation. In each report- inated by Nynas’ Board of Directors, as well as the ing entity, the finance staff is responsible for accurate Finance Policy. accounting and the closing of books. Finance staff In addition to these Corporate Governance instru- adheres to the Nynas Financial Reporting Manual and ments there is also an internal management system Procedures and validates and reconciles local accounts that includes a number of policies and binding rules before submitting them to business area management stating guidelines and instructions for the Group’s and Group Finance for consolidation. activities and employees. The most important policy Controllers in the business areas and functions document is the Nynas Code of Conduct, which for perform analytical reviews and investigations, con- instance includes regulations for compliance with com- duct business trend analyses and update forecasts
30 NYNAS ANNUAL REPORT 2019 NYNAS ANNUAL REPORT 2019 CORPORATE GOVERNANCE CORPORATE GOVERNANCE
and budgets. They investigate certain issues related Monitoring and follow-up to the financial information as and when needed. All Each business entity manager and their respective business areas present their financial performance in finance organisation are ultimately responsible for written reports to the Group Executive Management continuously monitoring the financial information of on a monthly basis. Group Financial Control and Group the various entities. Business Control have key responsibilities for control The information is also monitored at a business area activities regarding financial reporting. level, by group staff functions, the Group Executive Management and by the Board. The quality of the Information and communication financial reporting process and internal controls is Financial reports setting out the Group’s financial assessed by Group Finance every month as part of the position and the earnings trend of operations are quality assurance of reporting. submitted regularly to the Nynas Board. The Board Internal Audit is an independent and objective deals with the Annual Report prior to publishing and function that systematically evaluates and proposes monitors the audit of internal control and financial improvements for more effective governance, internal statements conducted by external auditors. control and risk management processes throughout Major subsidiaries in the form of legal entities also the Nynas Group. The function reports directly to the have a system of internal Board meetings with a formal Audit Committee, and performs its work in accor- agenda, including financial information, monitoring dance with a risk-based internal audit plan. Oppor- and decisions related to financial and accounting tunities for improvements identified in the internal matters. audits are reported to responsible business area Steering documents, such as policies and proce- management for actions. The Head of Internal Audit dures and instructions, are updated regularly on the reports administratively to the CFO and informs the company’s intranet and are available to all Nynas management team about audit activities that employees. have been performed (position currently vacant). The Information to external parties is communicated external auditors continuously assesses the internal on the Nynas website, which contains news and press control environment over financial reporting. releases. The Annual Report is made available to share- Finally, the external auditors perform a standard holders and the general public, both as a printed version examination of the annual accounts of almost all legal and electronically on Nynas’ website, nynas.com. entities in the Group, as well as the Annual Report.
31 NYNAS ANNUAL REPORT 2019
BOARD OF DIRECTORS .
MAGNUS WITTBOM SAM HOLMBERG FREDRIK LUNDSTRÖM JOACHIM MORATH Chairman of the Board. Senior Strategy Advisor, Neste Senior Advisor, AB Lundström & Far. CEO Feelgood Svenska AB. Attorney at Law. Corporation. Board member since 2020. Board member since 2020. Board member since 2020. Board member since 2020. Born 1964. Born 1968. Born 1958. Born 1969. Nationality: Swedish. Nationality: Swedish. Nationality: Swedish. Nationality: Finnish.
JYRKI MÄKI-KALA OSWALDO PÉREZ CHRISTIAN STÅHLBERG ROLAND BERGVIK CFO, Neste Corporation. Vice President Finance, PDVSA. General Counsel, Neste Employee Representative. Board member since 2018. Board member since 2020. Corporation. Board member since 2010. Born 1961. Born 1982. Board member since 2018. Born 1967. Nationality: Finnish. Nationality: Venezuelan. Born 1974. Nationality: Swedish. Nationality: Finnish.
PIA OVRIN Auditor Employee Representative. RICKARD ANDERSSON Board member since 2013. Authorised Public Accountant at Born 1966. Ernst & Young AB. Auditor in charge Nationality: Swedish. of the Nynas Group since 2015. Present customer assignments include Hexagon, Alimak Group and Pricer. Born 1973. Nationality: Swedish.
32 NYNAS ANNUAL REPORT 2019 GROUP EXECUTIVE COMMITTEE
BO ASKVIK ROLF ALLGULANDER EWA BESKOW JIM CHRISTIE President and CEO, acting. Vice President Manufacturing. Director Human Resources. Business Area Director Bitumen UK Education: MBA in Business Education: MSc Chemistry, MBA. Education: MSc Metallurgy. and Western Europe. Administration and Finance, Previous experience: Site Manager, Previous experience: Director Education: HND Civil Engineering. Stockholm School of Economics. Borealis, Kallo, Cracker Manager, Human Resources, SVP Worldwide, Previous experience: Sales Director Previous experience: CFO at Sapa, Borealis Portugal, Production Director Human Resources, VSM Nynas UK, various commercial roles Intrum Justitia, Sanitec, PA Resources, Manager, Borealis Stenungsund. Group, Vice President Human within Nynas, Sales Manager Colas. and various finance positions in Employed since 2007. Resources, Volvo Car Corporation, Employed since 1994. Nordstjernan, Östgöta Enskilda Bank, In current position since 2007. Engine Division, Director Human In current position since 2008. Neste, Borealis and TeliaSonera. Born 1962. Resources Uddeholm Tooling. Born 1960. Employed since 2014. Nationality: Swedish. Employed since 2006. Nationality: British. In current position since 2019. In current position since 2006. Born 1958. Born 1957. Nationality: Swedish. Nationality: Swedish.
SIMON DAY EVA KAIJSER ANDERS NILSSON HANS ÖSTLIN Vice President Naphthenics. Interim CFO. Director Supply Chain. Director Communication. Education: MEng Chemical Education: Bachelor of Science Education: MSc Mathematics, MBA Education: Berghs School of Engineering, MBA. in Business Administration and Industrial & Financial Economics. Communication. IHM Business School. Previous experience: Director Supply Economics with advanced studies Previous experience: Sales Director Previous experience: Various positions Chain, CEO, GM Nynas US Inc, in Finance from the University of Europe, Naphthenics Supply Chain in marketing and communications Head of Marketing, Electrical Industry Stockholm, Sweden. Manager, Naphthenics, Swedish at ITT Flygt and Nynas, Senior Naphthenics, Head of Business Previous experience: Treasury Railways, Lecturer in Mathematics, Consultant at Rita Platzer PR. Development and Planning & Finance Manager and SVP IR Technical University Luleå. Employed since 2006. Naphthenics, Head of Planning, and Strategy in Boliden, CFO in Employed since 2000. In current position since 2006. Eastham, Nynas Bitumen UK, Refinery Northland Resources and CEO in In current position since 2014. Born: 1961 Engineer, Stanlow Refinery, Shell UK. Nordic Mines. Board member in Born 1968. Nationality: Swedish. Employed since 1996. both listed and private companies. Nationality: Swedish. In current position since 2014. Employed since 2019. Born 1967. In current position since 2019. Nationality: British. Born 1972. Nationality: Swedish.
33 NYNAS ANNUAL REPORT 2019 NYNAS ANNUAL REPORT 2019 FINANCIAL REPORT FINANCIAL REPORT
Multi-year overview GROUP
SEK million 2019 2018 2017 2016 2015
INCOME STATEMENT AND STATEMENT OF COMPREHENSIVE INCOME Net sales 16,841 16,863 14,990 12,525 16,248 Operating expenses -16,712 -16,060 -14,071 -11,696 -15,155 Depreciation excluding leases -1,855 -647 -591 -481 -384 Share of profit/loss of joint ventures 19 21 14 21 28 OPERATING RESULT -1,707 -178 343 368 737
Net financial items -775 -414 -328 -264 -273 NET INCOME BEFORE TAX -2,482 -592 15 105 464
Tax -198 -202 -5 -30 -118 NET INCOME FOR THE YEAR -2,680 -793 10 75 346
STATEMENT OF FINANCIAL POSITION Fixed assets 5,849 5,784 6,088 5,868 5,189 Inventories 4,396 5,004 3,352 3,234 2,311 Current receivables 2,397 2,559 2,277 2,330 2,027 Cash & cash equivalents and short-term investments 1,696 845 546 416 950 ASSETS 14,338 14,192 12,262 11,848 10,477
Equity 46 3,250 3,539 3,661 3,823 Long-term interest-bearing liabilities 2,161 7,497 4,667 4,897 990 Long-term non-interest-bearing liabilities 310 421 386 345 385 Current interest-bearing liabilities 6,669 301 1,350 414 3,078 Current non-interest-bearing liabilities 5,152 2,723 2,320 2,531 2,202 EQUITY AND LIABILITIES 14,338 14,192 12,262 11,848 10,477
STATEMENT OF CASH FLOWS Cash flow from operating activities -588 -8 415 298 644 Changes in working capital 2,642 -955 -413 -762 1,119 CASH FLOW FROM OPERATING ACTIVITIES 2,054 -963 2 -464 1,763
Cash flow from investing activities -629 -428 -464 -1,161 -1,484 CASH FLOW AFTER INVESTING ACTIVITIES 1,425 -1,391 -462 -1,625 279
Proceeds from borrowings. repayment of borrowings -574 1,690 592 1,091 -227 Dividend 0 0 0 0 0 CHANGE IN CASH & CASH EQUIVALENTS 851 299 130 -534 52
CASH & CASH EQUIVALENTS AT END OF YEAR 1,696 845 546 416 950
KEY FINANCIAL RATIOS Adjusted operating result and amortization (EBITDA) 816.0 805.0 1,218.0 1,009.0 1,265.0 before IFRS 16 1 Adjusted operating result and amortization (EBITDA) 1,177.0 after IFRS 16 1 Net debt 7,134.0 6,953.0 5,471.0 4,895.0 3,117.0 Working capital 1,652.0 4,853.0 3,341.0 3,163.0 2,474.0 Return on average capital employed (12 months rolling). %1 2.1 1.4 6.5 6.2 11.7 Return on average capital employed. % -18.4 -2.2 3.4 3.3 8.4 Return on equity. % -162.6 -23.4 0.3 2.0 8.0 Net debt/equity ratio 15,569.6 213.9 154.6 133.7 81.5 Equity to assets ratio. % 0.3 22.9 28.9 30.9 36.5 Number of full-time employees 948.0 1,003.0 1,016.0 1,013.0 817.0
1) Excluding non-recurring items, for definition please see Board of Directors’ Report page 10
34 NYNAS ANNUAL REPORT 2019 NYNAS ANNUAL REPORT 2019 FINANCIAL REPORT FINANCIAL REPORT
Income statement and statement of comprehensive income GROUP
SEK million Note 2019 2018
INCOME STATEMENT Net sales 2 16,841.2 16,863.1 Cost of sales 3 -15,433.4 -14,151.8 GROSS RESULT 1,407.8 2,711.3
Other income and value changes 3 -16.8 46.1 Distribution costs 3 -2,891.4 -2,911.1 Administrative expenses 3 -186.0 -74.5 Share of profit/loss of joint ventures 15 18.8 21.5 Other operating income 4 277.9 349.8 Other operating expenses 4 -317.1 -320.8 OPERATING RESULT 2, 3, 4, 5, 6, 7, 8 -1,706.8 -177.7
Finance income 9 31.8 21.2 Finance costs 9 -806,8 -435.1 NET FINANCIAL ITEMS -775,0 -413.8
NET INCOME BEFORE TAX -2,481.8 -591.6 Tax 10 -198.3 -201.7 NET INCOME FOR THE YEAR -2,680.2 -793.3
STATEMENT OF COMPREHENSIVE INCOME Net income for the year -2,680.2 -793.3
Items that will be reclassified to the income statement: Translation differences 118.2 139.6 Currency hedges of net investments 28 -116.9 -190.6 Income tax associated with currency hedges of net investments 25.0 41.9 Cash flow hedges 28 -512.3 663.0 Income tax associated with cash flow hedges 101.4 -151.4 TOTAL AMOUNT THAT WILL BE RECLASSIFIED TO THE INCOME STATEMENT -384.6 502.5
Items that will not be reclassified to the income statement: Actuarial loss/gain pensions -128.9 -8.9 Income tax associated with actuarial loss/gains pensions -14.4 3.6 Inflation adjustment Argentina according to IAS 29 4.0 6.8 TOTAL AMOUNT THAT NOT WILL BE RECLASSIFIED TO THE INCOME STATEMENT -139.4 1.5
Other Comprehensive Income for the year, net after tax -523.9 504.0 COMPREHENSIVE INCOME -3,204.0 -289.3
Attributable to owners of the Parent -3,204.0 -289.3
Earnings per share The calculation of earnings per share is based on profit attributable to equity-holders of the Parent Company. The average number of shares in 2019 and 2018 was 67,532. 2019 2018 Profit for Numbers Per Profit for Numbers Per the year of shares share the year of shares share
Earnings per share -2,680.2 67,532 -39,688 -793.3 67,532 -11,747
As Nynas does not have, and did not have during the year, any outstanding convertible and subscription warrant programmes, no dilution effects arose during calculation of earnings per share.
35 NYNAS ANNUAL REPORT 2019 NYNAS ANNUAL REPORT 2019 FINANCIAL REPORT FINANCIAL REPORT
Statement of financial position GROUP
SEK million Note 2019-12-31 2018-12-31
ASSETS FIXED ASSETS INTANGIBLE ASSETS Goodwill 12 8.1 8.1 Supply contracts/customer lists 12 0.0 0.0 Computer software 12 61.8 66.1 TOTAL INTANGIBLE ASSETS 69.8 74.2
TANGIBLE ASSETS Land and buildings 13 272.3 276.2 Plant and machinery 13 3,281.7 4,503.7 Equipment 13 125.6 132.8 Construction in progress 13 390.5 362.7 TOTAL TANGIBLE ASSETS 4,070.1 5,275.4
LEASED RIGHT-OF-USE ASSETS 8, 13 1,307.9 –
FINANCIAL ASSETS Investments in associates and joint ventures 15 188.9 129.8 Derivative instruments 1.1 1.9 Other long-term receivables 16 14.6 3.9 Deferred tax assets 10 196.0 299.1 TOTAL FINANCIAL ASSETS 400.7 434.7
TOTAL FIXED ASSETS 5,848.6 5,784.2
CURRENT ASSETS Inventories 17 4,396.4 5,004.1 Accounts receivable 18, 26 1,502.0 1,323.8 Receivables from joint ventures 30 0.4 0.3 Derivative instruments 26, 27, 28 0.4 550.0 Tax receivables 46.2 78.0 Other current receivables 26 487.3 450.0 Prepayments and accrued income 19, 26 361.1 156.8 Cash and cash equivalents 20, 26 1,696.0 844.5 TOTAL CURRENT ASSETS 8,489.8 8,407.6
TOTAL ASSETS 14,338.4 14,191.8
36 NYNAS ANNUAL REPORT 2019 NYNAS ANNUAL REPORT 2019 FINANCIAL REPORT FINANCIAL REPORT
Statement of financial position GROUP
SEK million Note 2019-12-31 2018-12-31
EQUITY AND LIABILITIES EQUITY, GROUP 21 Share capital 67.5 67.5 Reserves -518.6 -103.6 Retained earnings, incl net income for the year 497.1 3,286.1 TOTAL EQUITY 46.0 3,250.1
INTEREST-BEARING LIABILITIES Shareholder loan 24, 26 – 1,137.1 Liabilities to credit institutions 24, 26 – 5,430.7 Non-current lease liabilities 8, 24 1,047.9 Provisions for pensions 22 1,113.1 929.3 TOTAL INTEREST-BEARING LIABILITIES 2,161.0 7,497.0
NON-INTEREST-BEARING LIABILITIES Other long-term liabilities 72.1 70.5 Derivative instruments 26, 27, 28 – 3.5 Deferred tax liability 10 84.0 186.5 Provisions for pensions 22 0.0 4.7 Other provisions 23 154.2 155.7 TOTAL LONG-TERM NON-INTEREST-BEARING LIABILITIES 310.2 420.9
TOTAL LONG-TERM LIABILITIES 2,471.2 7,917.9
INTEREST-BEARING LIABILITIES Shareholder loan 24 1,230.5 0.0 Liabilities to credit institutions 24, 26 5,137.6 300.9 Current lease liabilities 8, 24 300.9 TOTAL CURRENT INTEREST-BEARING LIABILITIES 6,668.9 300.9
NON-INTEREST-BEARING LIABILITIES Accounts payable 26 2,507.6 794.6 Liabilities to joint ventures 30 10.3 11.9 Derivative instruments 26, 27, 28 – 86.2 Tax liabilities 60.0 51.7 Other current liabilities 26 225.0 550.9 Accrued liabilities and deferred income 25, 26 2,338.2 1,215.0 Other provisions 23 11.1 12.5 TOTAL CURRENT NON-INTEREST-BEARING LIABILITIES 5,152.2 2,722.9
TOTAL CURRENT LIABILITIES 11,821.1 3,023.8
TOTAL EQUITY AND LIABILITIES 14,338.4 14,191.8
For information on the Group’s pledged assets and contingent liabilities, see Note 29.
37 NYNAS ANNUAL REPORT 2019 NYNAS ANNUAL REPORT 2019 FINANCIAL REPORT FINANCIAL REPORT
Statement of changes in equity GROUP
Defined benefit pension plans/ Currency other Hedges of Share accounting Cash Flow Net Invest- Translation Retained Total SEK million Capital principles Hedges ments Reserve Earnings Equity
OPENING BALANCE JAN 1, 2018 67.5 -209.9 -197.8 -162.1 -37.7 4,079.4 3,539.4
Net income for the year –– – – – -793.3 -793.3
Other comprehensive income – 1.5 511.6 -148.7 139.5 – 504.0 COMPREHENSIVE INCOME 0.0 1.5 511.6 -148.7 139.5 -793.3 -289.3 CLOSING BALANCE DEC 31, 2018 67.5 -208.4 313.8 -310.8 101.8 3,286.1 3,250.1
Net income for the year –– – – – -2,680.2 -2,680.2
Other comprehensive income – -139.4 -410.9 -91.9 118.2 – -523.9 COMPREHENSIVE INCOME – -139.4 -410.9 -91.9 118.2 -2,680.2 -3,204.1 DIVIDEND PAID –– – – – – – CLOSING BALANCE DEC 31, 2019 67.5 -347.8 -97.1 -402.6 220.0 605.9 46.0
38 NYNAS ANNUAL REPORT 2019 NYNAS ANNUAL REPORT 2019 FINANCIAL REPORT FINANCIAL REPORT
Cash flow statement GROUP
SEK million Note 2019 2018
OPERATING ACTIVITIES Profit after financial items -2,481.8 -591.6 Reversal of non-cash items 31 1,929.3 694.4 Taxes paid -35.5 -111.2 CASH FLOW FROM OPERATING ACTIVITIES BEFORE -588.1 -8.4 CHANGES IN WORKING CAPITAL
WORKING CAPITAL Operating receivables -365.4 559.2 Inventories 638.1 -1,629.9 Operating liabilities 2,369.8 115.9 CHANGES IN WORKING CAPITAL 2,642.4 -954.7
CASH FLOW FROM OPERATING ACTIVITIES 2,054.3 -963.1
INVESTING ACTIVITIES Acquisition of intangible assets -10.4 -20.9 Acquisition of tangible fixed assets -582.1 -405.2 Investment in financial assets -36.4 -1.8 Disposal/reduction of financial assets 0.0 0.1 CASH FLOW FROM INVESTING ACTIVITIES -628.9 -427.8
FINANCING ACTIVITIES 31 Proceeds from borrowings 419.5 2,994.8 Amortisations of borrowings -921.6 -1,304.9 CASH FLOW FROM FINANCING ACTIVITIES -502.1 1,688.9
CASH FLOW FOR THE YEAR 923.4 298.0
CASH & CASH EQUIVALENTS AT BEGINNING OF YEAR 844.5 546.1 Exchange differences -71.9 0.4 CASH & CASH EQUIVALENTS AT END OF YEAR 20 1,696.0 844.5
NOTES TO THE CASH FLOW STATEMENT The Group received interest of SEK 76.1 (21.0) million and paid interest of SEK 303.4 (173.8) million during the year.
39 NYNAS ANNUAL REPORT 2019 NYNAS ANNUAL REPORT 2019 FINANCIAL REPORT FINANCIAL REPORT
Income statement and statement of comprehensive income PARENT COMPANY SEK million Note 2019 2018
INCOME STATEMENT Net sales 33 14,704.5 15,056.2 Cost of sales 34 -13,432.9 -13,588.5 GROSS RESULT 1,271.6 1,467.7
Other income and value changes 34 -16.8 42.2 Distribution costs 34 -1,831.2 -1,810.7 Administrative expenses 34 -121.8 -19.1 Other operating income 35 287.1 289.7 Other operating expenses 35 -287.8 -272.9 OPERATING RESULT 33, 34, 35, 36, 37, 38, 39 -698.9 -303.2
Finance income 40 388.6 232.3 Finance costs 40 -916.0 -673.7 NET FINANCIAL ITEMS -527.4 -441.3
PROFIT/LOSS AFTER FINANCIAL ITEMS -1,226.3 -744.5
Appropriations 41 -0.3 -0.1 NET INCOME BEFORE TAX -1,226.5 -744.6
Tax 42 -42.4 -134.0 NET INCOME FOR THE YEAR -1,268.8 -878.6
STATEMENT OF COMPREHENSIVE INCOME Net income for the year -1,268.8 -878.6
Cash flow hedges -409.7 547.9 Income tax associated with cash flow hedges 83.6 -124.5 TOTAL AMOUNT THAT WILL BE RECLASSIFIED TO THE INCOME STATEMENT -326.1 423.4
COMPREHENSIVE INCOME -1,594.9 -455.2
40 NYNAS ANNUAL REPORT 2019 NYNAS ANNUAL REPORT 2019 FINANCIAL REPORT FINANCIAL REPORT
Balance sheet PARENT COMPANY SEK million Note 2019-12-31 2018-12-31
ASSETS FIXED ASSETS INTANGIBLE ASSETS Computer software 43 61.3 65.5 TOTAL INTANGIBLE ASSETS 61.3 65.5
TANGIBLE ASSETS Land and buildings 44 190.3 201.0 Plant and machinery 44 2,323.1 2,184.3 Equipment 44 78.4 99.1 Construction in progress 44 211.2 220.5 TOTAL TANGIBLE ASSETS 2,803.0 2,704.9
FINANCIAL ASSETS Investments in Group companies 45 2,876.6 2,876.9 Derivative instruments 1.1 1.9 Other long-term receivables 12.9 2.1 Deferred tax assets 42 0.0 56.1 TOTAL FINANCIAL ASSETS 2,890.6 2,937.0
TOTAL FIXED ASSETS 5,754.9 5,707.4
CURRENT ASSETS Inventories 46 3,533.6 4,044.4
CURRENT RECEIVABLES Accounts receivable 47, 55 730.2 710.7 Receivables from Group companies 55 1,135.2 909.7 Derivative instruments 26, 27, 55 0.4 550.0 Tax receivables 0.2 20.0 Other current receivables 55 161.6 176.4 Prepayments and accrued income 48, 55 281.3 81.3 TOTAL CURRENT RECEIVABLES 2,309.0 2,448.1
CASH & CASH EQUIVALENTS 49, 55 731.5 463.7
TOTAL CURRENT ASSETS 6,574.1 6,956.2
TOTAL ASSETS 12,329.0 12,663.7
41 NYNAS ANNUAL REPORT 2019 NYNAS ANNUAL REPORT 2019 FINANCIAL REPORT FINANCIAL REPORT
Balance sheet PARENT COMPANY SEK million Note 2019-12-31 2018-12-31
EQUITY AND LIABILITIES EQUITY 50 Share capital 67.6 67.6 Statutory reserve 96.0 96.0 TOTAL RESTRICTED EQUITY 163.7 163.7
Retained earnings 1,460.5 2,665.1 Net income for the year -1,268.8 -878.6 TOTAL UNRESTRICTED EQUITY 191.6 1,786.6
TOTAL EQUITY 355.3 1,950.2
UNTAXED RESERVES 41 4.2 4.2
LONG-TERM LIABILITIES INTEREST-BEARING LIABILITIES Shareholder loan 53, 55 0.0 1,137.1 Liabilities to credit institutions 53, 55 0.0 5,430.7 Liabilities to Group companies 0.2 0.2 Provisions for pensions 51 205.3 190.5 TOTAL LONG-TERM INTEREST-BEARING LIABILITIES 205.6 6,758.5
NON-INTEREST-BEARING LIABILITIES Other long-term liabilities 23.1 22.4 Derivative instruments 26, 27, 55 0.0 3.5 Provisions for deferred taxes 42 0.3 97.6 Other provisions 52 138.6 141.1 TOTAL LONG-TERM NON INTEREST-BEARING LIABILITIES 162.0 264.6
TOTAL LONG-TERM LIABILITIES 367.6 7,023.1
CURRENT LIABILITIES INTEREST-BEARING LIABILITIES Shareholder loan 53, 55 1,230.5 0.0 Liabilities to credit institutions 53, 55 5,137.6 256.4 Liabilities to Group companies 76.1 808.5 TOTAL CURRENT INTEREST-BEARING LIABILITIES 6,444.2 1,064.9
NON-INTEREST-BEARING LIABILITIES Accounts payable 55 2,338.2 612.4 Liabilities to Group companies 55 539.6 365.7 Derivative instruments 26, 27, 55 0.0 86.2 Tax liabilities 2.0 15.0 Other current liabilities 55 132.5 488.5 Accrued liabilities and deferred income 54, 55 2,134.3 1,042.2 Other provisions 52 11.1 11.4 TOTAL CURRENT NON-INTEREST-BEARING LIABILITIES 5,157.8 2,621.3 TOTAL CURRENT LIABILITIES 11,602.0 3,686.2 TOTAL EQUITY AND LIABILITIES 12,329.0 12,663.7
MEMORANDUM ITEMS Pledged assets 56 – – Contingent liabilities 56 70.8 801.8
42 NYNAS ANNUAL REPORT 2019 NYNAS ANNUAL REPORT 2019 FINANCIAL REPORT FINANCIAL REPORT
Statement of changes in equity PARENT COMPANY Share Statutory Cash Flow Acqui- Retained Total SEK million Capital Reserves Hedges sition Earnings Equity
67.5 96.0 -136.7 32.9 2,345.6 2,405.3 OPENING BALANCE JAN 1, 2018
Net income for the year – – – – -878.6 -878.6
Other comprehensive income – – 423.4 – – 423.4 COMPREHENSIVE INCOME 0.0 0.0 423.4 0.0 -878.6 -455.2 CLOSING BALANCE DEC 31, 2018 67.5 96.0 286.7 32.9 1,467.0 1,950.2
Net income for the year – – – – -1,268.8 -1,268.8 Other comprehensive income – – -326.1 – – -326.1 COMPREHENSIVE INCOME – – -326.1 – -1,268.8 -1,595.0 CLOSING BALANCE DEC 31, 2019 67.5 96.0 -39.4 32.9 198.2 355.3
Share capital at 31 Dec 2019 consisted of 67,532 shares, including 33,765 Class A shares and 33,767 Class B shares. This is unchanged from the previous year. The Board proposes a dividend of SEK 0 (0) per share for the year 2019.
43 NYNAS ANNUAL REPORT 2019 FINANCIAL REPORT
Statement of cash flow PARENT COMPANY SEK million Note 2019-12-31 2018-12-31
OPERATING ACTIVITIES Profit after financial items -1,226.5 -744.6 Reversal of non-cash items 58 388.8 403.8 Taxes paid 6.9 0.9 CASH FLOW FROM OPERATING ACTIVITIES BEFORE -830.9 -339.9 CHANGES IN WORKING CAPITAL
WORKING CAPITAL Operating receivables -315.5 277.7 Inventories 510.7 -1,407.5 Operating liabilities 2,721.8 641.1 CHANGES IN WORKING CAPITAL 2,917.1 -488.7
CASH FLOW FROM OPERATING ACTIVITIES 2,086.1 -828.6
INVESTING ACTIVITIES Acquisition of intangible assets -10.4 -20.9 Acquisition of tangible fixed assets -460.3 -226.9 Investment and in financial assets 0.0 – Disposal/reduction of financial assets 0.3 0.0 CASH FLOW FROM INVESTING ACTIVITIES -470.3 -247.8
FINANCING ACTIVITIES 58 Proceeds from borrowings 465.6 2,994.5 Amortizations of borrowings -1,654.0 -1,535.0 CASH FLOW FROM FINANCING ACTIVITIES -1,188.4 1,459.5
CASH FLOW FOR THE YEAR 496.2 383.2
CASH & CASH EQUIVALENTS AT BEGINNING OF YEAR 463.7 87.7 Exchange differences -159.6 -7.1 CASH & CASH EQUIVALENTS AT END OF YEAR 49 731.5 463.7
NOTES TO THE CASH FLOW STATEMENT The Parent Company received dividends of SEK 365.8 (214.5) million and interest income of SEK 22.6 (17.0) million, while interest expenses amounted to SEK 577.1 million (361.4).
44 NYNAS ANNUAL REPORT 2019 NYNAS ANNUAL REPORT 2019 FINANCIAL REPORT ACCOUNTING POLICIES
Accounting policies
General information at fair value. Financial assets and liabilities measured at fair value Nynas Group comprises the Parent Company Nynas AB, its consist of derivative instruments classified as financial assets and subsidiaries, holdings in joint ventures and associates. The Parent liabilities at fair value through profit or loss. Company is incorporated in Sweden and its registered office is in Preparation of financial statements in compliance with IFRS Stockholm. The address of the Head Office is Lindetorpsvägen 7, requires management to make critical judgments, accounting SE-121 63 Johanneshov. estimates and assumptions which affect the application of the Nynas AB, company reg. no, 556029-2509, domiciled in accounting policies and the carrying amounts of assets, liabilities, Stockholm, is since May 6, 2020 owned 49.999 per cent by Neste income and expense. The actual outcome may differ from these AB, company reg. no. 556232-3906, domiciled in Stockholm, estimates and assumptions. Sweden, 35.003 per cent by NyColleagues AB, company reg. no. Estimates made by management during the application of 559247-2418, domiciled in Stockholm, Sweden and 14.999 per IFRS which have a significant effect on the financial statements, cent by PDV Europa B.V., company reg. no. 27133447 domiciled and assumptions that may result in material adjustments to the in The Hague, the Netherlands. following year’s financial statements are described in more detail Neste AB is part of a Group in which Neste Oyj, company reg. in Note 1 Significant accounting estimates. no. FI 18523029, Espoo, Finland, is the Parent Company. The accounting estimates and assumptions are reviewed NyColleagues AB is owned by Nynässtiftelsen, reg. no. regularly. Changes in accounting estimates are recognised in 802481-5071, a foundation domiciled in Stockholm, Sweden. the period of the change if the change only affects that period. PDV Europa B.V, is part of a Group in which Petróleos de Vene- Changes are recognised in the period of the change and future zuela S.A., company reg. no. 73023, Caracas, Venezuela, is the periods if the change affects both. Parent Company. The policies below have been applied consistently for all pre- Nynas AB has issued a parent company guarantee pursuant to sented years unless otherwise stated. Section 479(C) of the UK Companies Act 2006 for the financial year 2018 on behalf of the subsidiaries companies registered in Changes in accounting principles England, see below. The parent company guarantee applies to IFRS 16 Leases all outstanding liabilities for the subsidiaries at the balance sheet Nynas applies IFRS 16 Leases, from January 1, 2019. IFRS 16 date until the obligations have been fulfilled. The subsidiaries replaces IAS 17 Leases. have applied the exemption from statutory audit provided for in IFRS 16 introduces a uniform lease recognition model for les- Section 479(A) of the UK Companies Act 2006. sees. A lessee recognises a right-of-use asset, which represents a right to use the underlying asset, and a lease liability, which Subsidiaries: represents an obligation to make lease payments. Exceptions – Nynas Ltd (CRN 02359113) are made for short-term leases and low value leases. For lessors, – Nynas Naphthenics Ltd (CRN 2450786) recognition is similar to the IAS 17, i.e. the lessor continues to The annual accounts and consolidated annual financial state- classify leases as finance or operating leases. ments were approved for issue by the Board on June 30, 2020. During 2018 a project group worked with preparations ahead The consolidated income statement and statement of financial of application of the new standard together with external position and the Parent Company’s income statement and bal- accounting specialists. The project involved compiling and ance sheet will be presented for adoption at the Annual General reviewing the Group’s leases, updating systems, and workshops Meeting to be held on June 30, 2020. and training for employees affected by IFRS 16.
Basis of preparation • L eases where Nynas is lessee The financial statements have been prepared in accordance with Nynas reports new assets and liabilities for operating leases International Financial Reporting Standards (IFRS) and interpre- for depots, tank rentals, vessels and offices and Nynas lease tations issued by the IFRS Interpretations Committee (IFRIC) as portfolio included almost 200 contracts. The costs for these adopted by the EU. In addition, RFR 1 Supplementary Accounting leases has changed from January 1, 2019, since Nynas will Rules for Groups, issued by the Swedish Financial Reporting recognise depreciation of the right-of -use assets and interest Board, have been applied. expenses for the lease liabilities. Previously Nynas recognised The Parent Company applies the same accounting policies as operating lease expenses on a linear basis over the lease term the Group, except in the cases described below in the section and recognised assets (prepaid lease payments) and liabilities entitled “The Parent Company’s Accounting Policies”. (accrued lease payments) only to the extent that there was The Parent Company’s functional currency is SEK, which is also a difference between the actual lease payments and the the reporting currency for the Parent Company and the Group. recognised cost. Consequently, the financial statements are presented in Swedish kronor. All amounts are stated in SEK millions unless otherwise • L eases where Nynas is lessor indicated. No significant effect is expected for leases where Nynas is Assets and liabilities are measured at historical cost, apart lessor. All leases are classified as operating leases. from certain financial assets and liabilities, which are measured
45 NYNAS ANNUAL REPORT 2019 ACCOUNTING POLICIES
• Transition and relief rules to the Group’s share of the joint venture’s equity, and any resid- Nynas has chosen to perform the transition in line with the ual value of fair value adjustments. The Group’s share of the joint Cumulative catch-up approach and has applied the expedi- venture’s profit after financial items, adjusted for any amorti- ent to not restate any comparative information. Right-of-use sation or reversals of fair value adjustments, is reported under assets have been determined as an amount equal to the lease Share of profit/loss of joint ventures in the consolidated income liabilities as identified. Leases with a lower value (<5000 USD) statement. Dividends from joint ventures are not included in the will not be included in the lease liability but will continue to Group’s profit for the year. be reported with a linear expensing over the lease term. The existence of leases with an original lease term of no more than Foreign branches 12 months, so-called short-term leases, is considered to be The functional currency is the local currency of the country in insignificant and they will also continue to be reported with which the branch operates. Translation into Swedish kronor linear expensing over the lease term. takes place in accordance with IAS 21. Balance sheet items are translated using the closing rate, while income statements items • Estimated effects January 1, 2019 are translated using the average rate for the period in which the Nynas operating profit for 2019 increases compared with the item occurred. use of the previous accounting policies on account of the fact that part of the lease expenses have been recognized Foreign currency as an interest expense. Cash flow from operating activities Functional currency and reporting currency Items included in increases, and cash flow from financing activities decreases the financial statements of the various entities in the Group are on account of the fact that the amortisation portion of lease reported in the currency used in the economic environment in payment have been recognised as payments in the financing which the entity operates (functional currency). The consolidated activities. The effects on the balance are presented in the financial statements are presented in Swedish kronor, which is table below . the Group’s reporting currency.
Adjustments due Adjusted Foreign currency transactions to Transition to opening balance Foreign currency transactions are translated into the functional MSEK IFRS 16 Leases January 1,2019 currency using the exchange rates prevailing at the transaction Right-of use assets 1,608 1,608 date. Foreign currency monetary assets and liabilities are trans- Lease liabilities, lated at the closing rate. Exchange gains and losses on translation interest bearing 1,608 1,608 of these transactions are recognised in profit or loss. Exchange gains and losses on operating receivables and liabilities are Basis of consolidation reported under operating result, while gains and losses on finan- The consolidated financial statements cover the Parent Company cial receivables and liabilities are reported under financial items. and all subsidiaries. Subsidiaries are entities in which the Parent Company directly or indirectly owns more than 50 per cent of Financial statements of foreign operations the voting power or has some other form of control. The assets and liabilities of foreign operations, including goodwill The consolidated financial statements are prepared using the and fair value adjustments arising on consolidation, are trans- acquisition method, which means the acquisition of a subsidiary lated from the foreign operation’s functional currency to the is treated as a transaction through which the Group indirectly Group’s reporting currency, SEK, at foreign exchange rates acquires the subsidiary’s assets and assumes its liabilities. prevailing at the balance sheet date. Revenues and expenses of Identifiable acquired assets and assumed liabilities in a business foreign operations are translated to SEK at average rates that acquisition are measured initially at their fair value on the acqui- approximate the foreign exchange rates prevailing at each of the sition date. Transaction costs attributable to the acquisition are transaction dates. Translation differences arising from the transla- recognised as incurred. With effect from the acquisition date, the tion of the net investment in foreign operations are recognised in acquiree’s income and expenses, identifiable assets and liabilities, other comprehensive income and are accumulated in a separate and any intangible assets, such as supply contracts, customer lists component of equity, a translation reserve. When the foreign and goodwill, are included in the consolidated accounts. Subsidi- operation is divested, the accumulated translation differences aries are deconsolidated from the date on which control ceases. attributable to the divested foreign operation are reclassified The accounting policies for subsidiaries have been adapted from equity to profit or loss for the year as a reclassification where necessary, in order to ensure consistent application of the adjustment at the date on which the profit or loss on the divest- Group’s policies. ment is recognised.
Joint ventures Net investments in foreign currency Holdings in joint ventures, in which the Group has joint control, The Parent Company has taken positions in foreign currencies are accounted for using the equity method. This means that the in order to hedge the majority of its net investments in foreign carrying amount of the investment in a joint venture corresponds subsidiaries against exchange rate changes. Exchange differences
46 NYNAS ANNUAL REPORT 2019 ACCOUNTING POLICIES
on these positions have been recognised directly in the Group’s expected manner of realisation or settlement of the carrying other comprehensive income for the year, taking into account amount of the underlying assets and liabilities, using tax rates and the tax effect, to the extent that they correspond to translation fiscal regulations enacted or substantively enacted at the balance differences recognised during the year. sheet date. Deferred tax assets relating to deductible temporary differences and tax loss carry-forwards are recognised only to Reporting of operating segments and the extent that it is probable they can be utilised against future geographical market taxable profits. Reporting of operating segments As Nynas AB’ shares and debt instruments are not subject Tangible assets to public trading, there is no formal requirements to disclose Tangible fixed assets are recognised as an asset in the balance segment information. Accordingly, Nynas AB has elected not to sheet when it is probable that future economic benefits associ- apply to IFRS 8 Operating Segment. ated with the asset will flow to the Company and the cost can be measured reliably. Tangible fixed assets are recognised at Reporting of geographical market cost less accumulated depreciation and impairment losses. Cost Sales figures are based on the country in which the customer is comprises the purchase price and any costs directly attributable located. Assets and investments are reported in the location of to the asset. Parts of tangible fixed assets with different useful the asset. lives are treated as separate components of tangible fixed assets. The carrying amount of a tangible fixed asset is derecognised on Revenue recognition its disposal, or when no future economic benefits are expected Recognised revenue is the fair value of the consideration received from its use or disposal. The gain or loss arising from the disposal or receivable from goods sold or services rendered in the course of a tangible fixed asset is the difference between the selling of the Group’s ordinary activities, excluding VAT, discounts and price and the asset’s carrying amount less direct costs to sell. returns, and after elimination of intra-group transactions. Reve- nue is classified as follows: Basis of depreciation for tangible fixed assets Depreciation of tangible fixed assets is based on original cost Sale of goods less any residual value. Depreciation takes place on a straightline Revenue is recognised when control passes to the customer. A basis over the useful life of the asset. The Group applies customer obtains control when they have the ability to direct the component depreciation, which means depreciation is based on use of the asset (goods/products) and to obtain substantially all the estimated useful lives of components. The residual values and of the benefits embodied in the same. In most cases this will be useful lives of assets are reviewed annually. the same point in time as when risks and rewards passes to the • Buildings over 20–50 years customer. • Land improvements over 20–25 years • Plant & machinery and equipment Interest income –Processing facilities over 10–20 years Interest income is recognised over the relevant period using the – Tanks over 10–40 years effective interest method. – Plant & machinery and equipment over 5–20 years • Equipment Dividend – Office equipment and computers over 3–10 years Dividend income is recognised when the right to receive payment – Other equipment over 5–10 years is established. Repair and maintenance, major inspection and overhauling Income taxes expenses, spare parts in investments Income tax comprises current and deferred tax. Income tax is Expenditure on major maintenance or repairs comprises the cost recognised in profit or loss for the year except when the under of replacement assets or parts of assets, inspection costs and lying transaction is recognised in other comprehensive income. overhaul costs. Where an asset or part of an asset is replaced and In these cases, the associated tax effects are recognised in other it is probable that future economic benefits associated with the comprehensive income. Current tax is the expected tax payable item will flow to Nynas, the expenditure is capitalised. Mainte- on the taxable income for the year, using tax rates enacted at the nance, inspection and overhaul costs, associated with regularly balance sheet date, and any adjustment to tax payable in respect scheduled major maintenance programmes planned and carried of previous years. Current tax liabilities are offset against current out at recurring intervals, are capitalised and amortised over the tax receivables and deferred tax assets are offset against deferred period to the next scheduled inspection and overhaul. All other tax liabilities when the entity has a legal right to offset these maintenance costs are expensed as incurred. items. Deferred tax is recognised based on temporary differences between the carrying amounts of assets and liabilities for financial Leases reporting purposes and their value for tax purposes. Deferred Policy applicable before January 1, 2019 – IFRS 16 taxes are measured at their nominal amount and based on the Nynas, when being a lessee identifies if a contract contains a lease
47 NYNAS ANNUAL REPORT 2019 ACCOUNTING POLICIES
by testing if Nynas has the right to obtain substantially all of the Computer software economic benefits from use of the identified assets and has the A number of production and information systems have been right to direct the use of the identified asset and that the supplier capitalised. Direct external and internal expenditure on the devel- has no substantial rights of substitution. opment of software for internal use is capitalised. Expenditure Nynas has decided to separate non-lease components from on pilot studies, training and regular maintenance is recognised the lease components in contracts concerning vessels and depots. as an expense as it is incurred. The value of intangible assets The non-lease component cost should then be recognized as an is reviewed at least once a year. If an asset’s carrying amount expense and not be included in the calculation of a right-of-use exceeds its recoverable amount, it is written down to the recover- asset and lease liability. able amount immediately. The useful life of information systems The lease contracts are assessed at the commencement developed internally is between five and ten years. Software date whether the lessee is reasonably certain to exercise an relating to production planning and logistics optimisation has an option to extend the lease; or to exercise an option to purchase estimated useful life of ten years. the underlying asset; or not to exercise an option to terminate the lease. Basis of amortisation for intangible assets The leasing liability and right-of-use asset is calculated by Amortisation of intangible assets is based on original cost less using the implicit rate in the contract. If the implicit rate cannot be any residual value. Depreciation takes place on a straight-line identified the incremental borrowing rate is instead applied, which basis over the useful life of the asset. is the interest rate the company had been given if the investment • Goodwill – indefinite had been financed through a loan from a financial institute. • Supply contracts/customer lists over 7–10 years Nynas depreciates the right-of-use asset from the commence- • Trademarks over 5 years ment date to the earlier of the end of the useful life of the • Computer software over 3–10 years Right-of Use asset or the end of the lease term. After commencement date the carrying amount of the lease liability and the Right-of-Use asset is remeasured to reflect any Impairment of tangible fixed assets modification or reassessment of a lease contract. The carrying amounts of the Group’s depreciable assets are Nynas has chosen to apply the two expedients concerning tested for impairment when there is an indication that a particular leases shorter than one year and low value assets that need to be asset may be impaired. The Group’s depreciable assets are taken into consideration when a lease contract is recognized. reviewed when required to establish whether there is any indi- cation of impairment. If any such indication exists, the asset is Policy applicable before January 1, 2019 – IAS 17 tested for impairment. The Group applies IAS 17 when classifying leases as finance An impairment loss is recognised if the asset’s recoverable leases or operating leases. A lease is classified as an operating amount, i.e. the higher of value in use and net realisable value, is lease when it does not transfer substantially all the risks and lower than the carrying amount. rewards incidental to ownership. Payments made under operat- When calculating value in use, future cash flows are dis- ing leases are recognised as an expense on a straight-line basis counted using a pre-tax discount rate that reflects the current over the lease term. The Group does not have any significant market view of risk-free interest and risk specific to the asset. finance leases. Reversal of impairment losses Intangible assets Impairment losses recognised for assets are reversed if there is no Goodwill longer an indication of impairment and there has been a change Goodwill arises when the cost of a business combination exceeds in the assumptions on which the estimate of recoverable amount the fair value of the acquired identifiable assets and liabilities was based. However, goodwill impairment is never reversed. according to the acquisition analysis. Goodwill has arisen from An impairment loss is only reversed to the extent that the business combinations, resulting in increased profitability on inte- asset’s carrying amount after the reversal does not exceed the gration into the Nynas Group. Goodwill has an indefinite useful carrying amount that would have been determined (net of depre- life and is tested for impairment when there is an indication of ciation) had no impairment loss been recognised for the asset. impairment. Financial instruments Supply contracts/customer lists Financial instruments reported under assets in the statement Supply contracts and customer relationships acquired in a busi- of financial position include cash & cash equivalents, accounts ness combination is recognised at the acquisition date fair value. receivable, shares, loan receivables and derivative instruments. Supply contracts and customer relationships have a finite useful Financial instruments reported under liabilities and equity includes life and are recognised at cost less accumulated amortisation and accounts payable, loan liabilities and derivative instruments. impairment. Amortisation takes place on a straight-line basis over the life of the supply contract or customer relationship. Recognition of financial assets and liabilities A financial asset or liability is recognised in the statement of
48 NYNAS ANNUAL REPORT 2019 ACCOUNTING POLICIES
financial position when the Company becomes a party to the with a loss reserve for expected credit losses. Assets classified instrument’s contractual terms. Accounts receivable are recog- at amortized cost are held according to the business model to nised when an invoice has been sent. A liability is recognised collect contractual cash flows that are only payments of principal when the counterparty has performed and there is a contractual amounts and interest on the outstanding capital amount. obligation to pay, even if an invoice has not yet been received. Accounts receivable are recognized initially at fair value and Accounts payable are recognised when invoices are received. subsequently at amortized cost using the effective interest rate A financial asset is derecognised when the rights to receive method, less any provision for impairment. Other assets such benefits have been realised, expired or the Company loses con- as other current receivables and cash and cash equivalents are trol over them. The same applies to a component of a financial measured at amortized cost, less any provision for impairment. asset. A financial liability is derecognised when the contractual obligation has been settled or extinguished in some other Cash and cash equivalents way. The same applies to a component of a financial liability. A Cash & cash equivalents consist of cash, demand deposits with financial asset and a financial liability may be offset and the net banks and similar institutions and short-term deposits with an amount presented in the statement of financial position when, original maturity of three months or less, which are subject to an and only when, the Company has a legally enforceable right to insignificant risk of changes in value. set off the recognised amounts and the Company intends either to settle on a net basis, or to realise the asset and settle the Financial liabilities at amortised costs liability simultaneously. Purchases and sales of financial assets are Accounts payable and loan liabilities are classified as financial lia- recognised on the trade date (the commitment date). bilities at amortised costs. Accounts payable have short expected settlement terms and are measured at nominal amounts with Classification and measurement no discounting. Financial liabilities at amortised costs using the Classification and measurement for financial assets reflect the effective interest method. business model in which assets are managed and their cash flow characteristics. IFRS9 contains three principal classification Derivative financial instruments and hedge accounting categories for financial assets: Nynas documents its risk management objective and strategy for undertaking various hedge transactions. Nynas designates their • amortised costs derivatives as hedges of foreign exchange risk and oil price risk • fair value through other comprehensive income, or associated with the cash flows of highly probable forecast trans- • fair value through profit or loss actions (cash flow hedges). Nynas documents at the inception See Note 26 for details about each type of financial asset. of the hedging transaction the economic relationship between hedging instruments and hedged items including whether the Impairment of financial assets hedging instrument is expected to offset changes in cash flows Impairment is accounted for using the forward-looking expected of hedged items. credit loss (ECL) model. The impairment model applies to finan- Derivatives are initially recognised at fair value on the date a cial assets measured at amortised costs (trade receivables and derivative contract is entered into and are subsequently re-meas- other assets). Nynas applies the simplified approach for trade ured to their fair value at the end of each reporting period. The receivables. The expected credit losses on trade receivables are accounting for subsequent changes in fair value depends on estimated using a provision matrix by reference to past default whether the derivative is designated as a hedging instrument, experience of the debtor and an analysis of the debtor’s current and if so, the nature of the item being hedged and the type of financial position, adjusted for factors that are specific to the hedge relationship designated. debtors, general economic conditions of the industry in which The fair values of various derivative financial instruments used the debtors operate and an assessment of both the current as for hedging purposes are disclosed in Note 28. Movements in well as the forecast direction of conditions at the reporting date. the hedging reserve in shareholders’ equity are shown in Note The Group estimates expected credit losses for other assets 28. The full fair value of a hedging derivative is classified as a measured at amortized cost (e.g. cash and cash equivalents) dur- non-current asset or liability when the remaining maturity of the ing the next twelve months, as the assets are considered to be hedged item is more than 12 months; it is classified as a current of low risk. Cash and cash equivalents are covered by provisions asset or liability when the remaining maturity of the hedged for expected loan losses according to the general method. Nynas item is less than 12 months. Trading derivatives are classified as a applies a rating-based method in combination with other known current asset or liability. information and forward-looking factors for assessing expected credit losses. Cash flow hedges that qualify for hedge accounting The effective portion of changes in the fair value of derivatives Financial assets at amortised cost that are designated and qualify as cash flow hedges is recog- Financial assets classified at amortized cost are initially measured nised in the cash flow hedge reserve within equity, limited to the at fair value with the addition of transaction costs. After the cumulative change in fair value of the hedged item on a present first reporting, the assets are valued at amortized cost reduced value basis from the inception of the hedge. The gain or loss
49 NYNAS ANNUAL REPORT 2019 ACCOUNTING POLICIES
relating to the ineffective portion is recognised immediately in the difference between the actual return and the discount rate profit or loss within operating income. When forward contracts for pension plan assets will be recognised in Other comprehen- are used to hedge forecast transactions, the company generally sive income. The financing cost of the net pension liability is designates only the change in fair value of the forward contract calculated using the discount rate for the pension liability. The related to the spot component as the hedging instrument. Gains financing cost, the cost of service during the current period or losses relating to the effective portion of the change in the and any previous periods, losses from settlements and costs in spot component of the forward contracts are recognised in connection with special payroll tax are all reported in the income the cash flow hedge reserve within equity. The change in the statement. Special payroll tax is regarded as part of total net forward element of the contract that relates to the hedged item pension liability. (‘aligned forward element’) is recognised within other compre- The obligation for retirement pension and family pension for hensive income in the costs of hedging reserve within equity. employees in Sweden is covered partly by insurance with Collec- tum. In accordance with the statement of the Swedish Financial Hedging of net investments Reporting Board, UFR 10, this is a multi-employer defined benefit Investments in foreign subsidiaries (net assets including plan. For the 2019 financial year, the Company did not have goodwill) have been partially hedged by means of foreign access to sufficient information to enable it to report this plan as a exchange forward contracts. The effective portion of changes defined benefit plan. Consequently, the ITP pension plan insured in the fair value of derivative instruments designated as through Collectum is reported as a defined contribution plan. hedges of a net investment is recognised in other compre- hensive income and accumulated in the translation reserve Provisions in equity. The ineffective portion is recognised directly under A provision is recognised in the statement of financial position financial items. Cumulative gains and losses in equity are recy- when the Group has a present obligation (legal or constructive) cled into profit or loss through other comprehensive income as a result of a past event and it is probable that an outflow of on disposal of the foreign operation. resources will be required to settle the obligation, and a reliable estimate can be made of the amount. Where the effect of the Inventories time value of money is material, the amount of a provision shall Inventories are stated at the lower of cost and net realisable be calculated as the present value of the expenditures required value, with due consideration of obsolescence. Net realisable to settle the obligation. The provisions are mainly related to value is the estimated selling price in the ordinary course of busi- restructuring and environmental obligations. ness, less the estimated costs of completion and selling expenses. Cost is based on the first-in/first-out (FIFO) principle and Restructuring includes expenditure incurred in acquiring the inventories and A provision for restructuring is recognised when the Group bringing them to their existing location and condition. In the case has approved a detailed and formal restructuring plan, and the of manufactured inventories and work in progress, cost includes restructuring has either commenced or has been announced an appropriate share of overheads based on normal operating publicly. No provision is posted for future operating costs. capacity. Onerous contracts Employee benefits A provision for onerous contracts is recognised when the Post-employment benefits expected benefits to be derived by the Group are lower than the The Group has defined contribution and defined benefit pension unavoidable cost of meeting its obligations under the contract. plans. Pension costs for defined contribution plans are recog- nised in the income statement as employees render service. Contingent liabilities Pension obligations are measured on an undiscounted basis, as A contingent liability is a potential undertaking that derives all these plans fall due within twelve months. The Group’s net from events which have occurred and whose incidence is only defined benefit obligation is determined separately for each plan, confirmed by one or more uncertain future events. A contin- based on company-specific actuarial assumptions. These include gent liability can also be an existing undertaking that has not assessments of future salary increases, rate of inflation, mortality, been reported in the Balance Sheet because it is unlikely that an attrition rate and changes in the income base amount. Pension outflow of resources will be required or because the size of the obligations are discounted to their present value. The calculation undertaking cannot be calculated. See Note 29. of defined benefit pension plans has been done in accordance with the “Project Unit Credit method” by an independent Accounting policies – Parent Company external actuary. The discount rate on first-rate corporate bonds The Parent Company prepares its financial statements in accord- is used in those countries where there is a functional market for ance with the Swedish Annual Accounts Act and the Swedish such bonds (in Sweden the rate is determined based on the mar- Financial Reporting Board’s recommendation RFR 2, Accounting ket rate of mortgaged-backed bonds as this is comparable with for Legal Entities. RFR 2 requires the Parent Company, as a legal high quality corporate bonds). Other countries use government entity, to prepare its annual financial statements in compliance bonds as a basis for the rate. Net actuarial gains and losses and with all the IFRS and IFRIC interpretations adopted by the EU, to
50 NYNAS ANNUAL REPORT 2019 ACCOUNTING POLICIES
the extent possible within the framework of the Swedish Annual Accounts Act and the Swedish Pension Obligations Vesting Act, and taking into account the relationship between tax income/ expense and accounting profit. Nynas AB applies the same recognition criteria and accounting policies as the Group, apart from the exceptions described below.
Employee benefits/defined benefit plans When calculating the defined benefit pension plans, the Parent Company applies the rules contained in the Swedish Pension Obligations Vesting Act and the Swedish Financial Supervisory Authority’s regulations to the extent that they are required for tax deductibility. The main differences from IAS 19 relate to determination of the discount rate and the fact that the defined benefit obligation is based on the present salary level, without taking into account future salary increases, and that all actuarial gains and losses are recognised immediately in profit or loss.
Taxes Untaxed reserves are recognised including of deferred tax liability in the Parent Company. In the consolidated financial statements, untaxed reserves are divided into deferred tax liability and equity.
Group contributions and shareholder contributions Shareholder contributions are recognised directly in the recip- ient’s equity and capitalised in the contributor’s shares and participating interests, to the extent that no impairment has been identified. Group contributions received from subsidiaries are recognised under finance income in the income statement. Group contribu- tions paid to subsidiaries are recognised as an investment.
Investments in group companies Investments in Group companies are recognised at cost less any impairment losses. Dividends received are recognised as income, while repayments of contributed capital reduce the carrying amount.
Financial guarantees The Parent Company’s financial guarantees consist mainly of sureties in favour of subsidiaries. Financial guarantees mean that the Company has an obligation to reimburse the holder of a debt instrument for losses it incurs because a specified debtor fails to make payment when due under the contractual terms. When reporting financial guarantees, the Parent Company applies an exemption from the provisions of IAS 39 permitted by the Swed- ish Financial Reporting Board. The exemption relates to financial guarantees issued in favour of subsidiaries, associates and joint ventures. The Parent Company reports financial guarantees as a provision in the balance sheet when the Company has an obligation, and an outflow of resources is likely to be required to settle the obligation.
51 NYNAS ANNUAL REPORT 2019 NOTES
Contents Notes
NOTE GROUP PAGE NOTE PARENT COMPANY PAGE 1 Significant accounting policies 53 33 Information by geographical market 84 and accounting estimates and sales revenues by category 2 Information by geographical market and 54 34 Costs itemised by nature of expense 84 sales revenues by category 35 Other operating income and expenses 85 3 Costs itemised by nature of expense 54 36 Employees, personnel expenses and 85 4 Other operating income and expenses 55 remuneration of senior executives 5 Employees, personnel expenses and 55 37 Depreciation and amortisation of tangible 86 remuneration of senior executives and intangible assets 6 Depreciation, amortisation and impairment of 56 38 Auditors’ fees and other remuneration 86 tangible and intangible assets 39 Fees for operating leases 86 7 Auditors’ fees and other remuneration 57 40 Net financial items 87 8 Leases 57 41 Appropriations 87 9 Net financial items 58 42 Taxes 88 10 Taxes 58 43 Intangible assets 89 11 Earnings per share 59 44 Tangible assets 90 12 Intangible assets 60 45 Shares in group companies 90 13 Tangible assets 61 46 Inventories 91 14 Shares in Group companies 63 47 Accounts receivable 91 15 Investments in joint ventures Investments in 64 48 Prepayments and accrued income 92 joint ventures 49 Cash and cash equivalents 92 16 Other long-term receivables 64 50 Equity 92 17 Inventories 64 18 Accounts receivable 65 51 Provisions for pensions 93 19 Prepayments and accrued income 65 52 Other provisions 94 20 Cash and cash equivalents 66 53 Liabilities to credit institutions 94 21 Equity 66 54 Accrued liabilities and deferred income 96 22 Provisions for pensions 67 55 Financial assets and liabilities 96 23 Other provisions 71 56 Pledged assets and contingencies 97 24 Liabilities to credit institutions 73 57 Related party disclosures 98 25 Accrued liabilities and deferred income 73 58 Supplementary information to the 98 cash flow statement 26 Financial assets and liabilities 74 27 Financial risk management, supplementary 75 information 28 Derivatives and hedging 80 29 Pledged assets and contingencies 81 30 Related party disclosures 82 31 Supplementary information to the cash 83 flow statement 32 Significant events after the fiscal year 83
52 NYNAS ANNUAL REPORT 2019 NOTES
Notes to the financial statements – Group (Amount in tables in SEK million unless otherwise stated)
Note 1. Significant accounting policies and accounting estimates
Impairment of tangible asset Assumptions in the calculation of pension provisions The carrying amounts of the Group’s depreciable assets are tested The actuarial assessment of pension obligations and pension for impairment when there is an indication that a particular asset costs is based on the actuarial assumptions which are specified in may be impaired. The Group’s depreciable assets are reviewed note 22. A change to any of these assumptions may have a con- when required to establish whether there is any indication of siderable effect on the estimated retirement benefit obligation impairment. If any such indication exists, the asset is tested for and pension costs. The discount rate is determined by reference impairment. An impairment loss is recognised if the asset’s recov- to the return on a mortgage bond of a term consistent with the erable amount, i.e. the higher of value in use and net realisable Group’s average remaining term of the obligation, which for value, is lower than the carrying amount. Nynas is 30 years. When calculating value in use, future cash flows are discoun- ted using a pre-tax discount rate that reflects the current market Going concern assessment view of risk-free interest and risk specific to the asset. Conseque- The most material uncertainties remaining relate to the ability of tly, the impairment testing could and have had during 2019 the Company to refinance its debts to the major creditors in June material effect on the financial result, see also note 13. 2021, and forthwith meet the conditions for the agreed extension. Further uncertainties exist in relation to the Company’s ability to Provision for future environmental programmes finance its liquidity needs going forward and to hedge its primary Nynas has two refineries and a number of bitumen terminals and secondary risks. According to the Company’s business plan, requiring operating permits under Swedish environmental law. it will be able to meet and pay its liabilities to other creditors than The refinery in Eastham – jointly owned with another party – and the major creditors when the current reorganisation is con- the bitument terminal in Dundee are operated under the United cluded, and such payments are required to be made. In addition, Kingdom’s national environmental laws. The refinery in Harburg Nynas has sufficient liquidity for 12 months to cover day to day operation is regulated between Nynas and environmental author- operations based on assumed crude price levels and that Nynas ity of the city of Harmburg. can complete planned and necessary purchases of oil directly and Future restoration costs associated with the operations’ envi- through off-balance sheet crude purchase arrangements yet to be ronmental impacts may be difficult to establish, both in terms signed to meet demand and maintain production volumes. of size and timing. Changes in environmental legislation and the The shareholders’ continued support, evidenced inter alia emergence of new cleaning up technology are factors that may by the recent ownership restructuring to take Nynas out of US affect the size of the provision. Consequently, the provision may Sanctions, the shareholder contribution and the decision apply need to be adjusted in the future, which may have a material going concern on the second control balance sheet and resolve effect on future financial results. See also note 23. to continue its operation, is a key element for a successful con- clusion of the reorganisation. Income tax The support from the major creditors, the shareholders Significant estimates are made to determine both current and and the administrators taken together with the business plan deferred tax liabilities/assets, not least the value of deferred tax showing that Nynas is a viable business and the process run by assets. The company must then determine the possiblilty that Carnegie to find new capital, means that Nynas has reason to deferrd tax assets will be utilized and offset against future taxa- believe that the reorganization would be successful. ble profits. The actual results may differ from these estimates, for Based on the above-mentioned circumstances together, instance due to changes in the business climate, changed tax leg- it is the Board’s assessment that the accounts shall be prepared islation, or the outcome of the final review by tax authorities and on a going concern basis despite the material uncertainties tax courts of tax returns. In Belguim tax losses carryforwards are identified. For further information please see the Board of only to a minor part recognized since utilization of these losses Directors Report. is very small. In Sweden tax losses carryforward have to its major part been measured as deferred tax assets since future utilization Disputes have a high probabiliby, for values see note 10. Nynas conducts domestic and international operations and is Nynas has tax litigation cases mainly in South America and occasionally involved in disputes and legal proceedings arising ongoing tax audits/questions in other countries. Management in the course of these operations. These disputes and legal consult with legal experts on tax litigation cases and tax audits. It proceedings are not expected, either individually or collectively, is management’s assessment that the tax litigations may have neg- to have any significant negative impact on Nynas’s operating ative effect on the financial position or on the financial statement profits, profitability or financial position. See note 29. but the term of size and timing is difficult to predict. See note 29
53 NYNAS ANNUAL REPORT 2019 NOTES
Note 2. Information by geographical market and sales revenues by category
SALES REVENUES BY GEOGRAPHICAL MARKET 2019 2018
Sweden 2,023.3 1,899.9 Rest of Nordics 3,364.0 3,789.1 Rest of Europe 8,174.7 7,879.5 Americas 385.8 384.0 Other 2,893.4 2,910.6 TOTAL 16,841.2 16,863.1
TOTAL ASSETS BY GEOGRAPHICAL MARKET 2019 2018
Sweden 6,820.6 7,172.2 Rest of Nordics 126.2 127.7 Rest of Europe 5,607.9 5,321.9 Americas 756,9 654.9 Other 1,026.8 915.2 TOTAL 14,338.4 14,191.8
INVESTMENTS BY GEOGRAPHICAL MARKET 2019 2018
Sweden 470.6 247.8 Rest of Nordics 7.9 24.5 Rest of Europe 113.1 152.9 Americas 0.3 0.5 Other 0.1 0.3 TOTAL 592.0 425.9
SALES REVENUES BY CATEGORY 2019 2018 Sale of goods. external 16,759.0 16,838.1 Revenue from services 82.2 25.0 TOTAL 16,841.2 16,863.1
Note 3. Costs itemised by nature of expense
2019 2018
Raw materials 11 592.0 11 619.1 Transport and distribution costs 1 707.8 2 089.0 Manufacturing expenses 1 311.7 1 231.0 Costs for employee benefits (note 5) 1 047.8 1 066.0 Depreciation, amortisation, impairment (note 8, 12, 13) 1,856.4 647.4 Depreciation, amortisation, impairment, Leases (note 8, 12, 13) 339.2 – Other income and value changes 16.8 -46.1 Other expenses 637.1 463.4 TOTAL 18,508.9 17,069.8
Other income and value changes consists of unrealized gain and losses from oil and currency derivatives of -16.8 (46.1).
54 NYNAS ANNUAL REPORT 2019 NYNAS ANNUAL REPORT 2019 NOTES NOTES
Note 4. Other operating income and expenses
OTHER OPERATING INCOME 2019 2018
Exchange gains on operating receivables/liabilities 208.6 287.6 Other service revenue 69.3 62.2 TOTAL 277.9 349.8
OTHER OPERATING EXPENSES
Exchange losses on operating receivables/liabilities -317.1 -320.8 TOTAL -317.1 -320.8
Note 5. Employees, personnel expenses and remuneration of senior executives
The average number of employees. with wages. salaries. other remuneration. social security contributions and pension costs. is shown in the tables below.
2019 2018 AVERAGE NUMBER OF EMPLOYEES Men Women Total Men Women Total
PARENT Sweden 327 145 472 329 138 467 TOTAL PARENT 327 145 472 329 138 467
GROUP Sweden 327 145 472 329 138 467 TOTAL SWEDEN 327 145 472 329 138 467
2019 2018 AVERAGE NUMBER OF EMPLOYEES Men Women Total Men Women Total
United Kingdom 39 20 59 57 24 81 Belgium 9 8 17 8 9 17 Poland 12 5 17 12 4 16 Estonia 14 3 17 14 3 17 Spain 3 2 5 3 2 5 Germany 257 31 288 251 30 281 France 4 4 8 4 4 8 Denmark 3 2 5 4 2 6 Finland 1 2 3 3 2 5 USA 1 2 3 2 3 5 Other countries 50 41 91 43 52 95 TOTAL OUTSIDE SWEDEN 393 120 513 401 135 536
TOTAL GROUP 720 265 985 730 273 1.003
EMPLOYEE BENEFIT COSTS. GROUP 2019 2018
Wages. salaries and other benefits 757.7 744.4 Pension costs. defined benefit (see also note 22) 72.9 107.3 Pension costs. defined contribution (see also note 22) 46.6 38.5 Social security contributions 170.7 175.8 TOTAL GROUP 1,047.8 1,066.0
55 NYNAS ANNUAL REPORT 2019 NOTES
Con’t. Note 5
2019 2018 REMUNERATION AND OTHER BENEFITS. President Other senior President Other senior SENIOR EXECUTIVES. GROUP and CEO* executives Total and CEO executives Total Basic salary 5.7 11.4 17.1 4.8 15.2 20.0 Variable pay 0.3 0.5 0.8 1.6 1.8 3.4 Other benefits 0.0 0.5 0.5 0.1 0.5 0.6 Social security contributions 1.9 3.1 5.0 2.2 5.3 7.5 Pension costs 2.0 4.6 6.6 1.5 5.4 6.9 TOTAL 9.9 20.0 29.9 10.2 28.2 38.4 *) Refers to Gerth Wendroth and Bo Askvik.
Nynas Group Management 2019 (not including CEO). Rolf In the event of involuntary termination of employment. the Allgulander. Simon Day. Eva Kaijser (acting). Anders Nilsson. Ewa President is entitled to termination benefits corresponding to 6 Beskow. Jim Christie. Peter Bäcklund. Hans Östlin months’ salary. Nynas Group Management 2018 (not including CEO). Rolf Allgulander. Simon Day. Bo Askvik. Anders Nilsson. Ewa Beskow. GENDER DISTRIBUTION IN Jim Christie. Peter Bäcklund. Hans Östlin. Pieter Godderis SUBSIDIARIES BOARD 2019 2018 In 2019 0.0 MSEK (0.2) was paid in fees to one board member. Female representation. % Board 31.5 28.1 Group president and CEO Group Management 22.2 10.0 Termination of employment in relation to the President requires 6 months notice by either party.
Note 6. Depreciation, amortisation and impairment of tangible and intangible assets
Intangible Tangible DEPRECIATION AND AMORTISATION BY FUNCTION 2019 2018 2019 2018
Cost of sales 3.3 3.3 562.2 561.2 Distribution costs 0.8 0.8 42.9 41.3 Administrative expenses 17.9 21.1 12.4 19.7 TOTAL 21.9 25.2 617.5 622.2
IMPAIRMENT LOSSES
Cost of sales 0.0 0.0 1,217.0 0.0 TOTAL DEPRECIATION, AMORTISATION AND IMPARIMENT BY FUNCTION 21.9 25.2 1,834.5 622.2
DEPRECIATION AND AMORTISATION OF TANGIBLE AND INTANGIBLE ASSETS BY TYPE OF ASSET 2019 2018
Computer software 21.9 25.2 Buildings 12.5 16.0 Land improvements 6.1 7.0 Plant and machinery 561.3 566.5 Equipment 37.6 32.7 TOTAL AMORTISATION OF TANGIBLE AND INTANGIBLE ASSETS 639.4 647.4
IMPAIRMENT LOSSES
Plant and machinery 1,217.0 – TOTAL IMPAIRMENT LOSSES 1,217.0 –
TOTAL RECOGNISED DEPRECIATION, AMORTISATION AND IMPAIRMENT 1,856.4 647.4
DEPRECIATION AND AMORTISATION OF RIGHT OF USE ASSETS
Tank and depots 234.8 – Vessels 78.7 – Building and office space 14.0 – Other 11.7 – TOTAL DEPRECIATION AND AMORTISATION OF RIGHT OF USE ASSETS 339.2 –
56 NYNAS ANNUAL REPORT 2019 NYNAS ANNUAL REPORT 2019 NOTES NOTES
Note 7. Auditors’ fees and other remuneration
AUDIT FEES 2019 2018
ERNST & YOUNG AB Annual audit 6.8 6.1 Other audit services 6.3 0.4 Tax advisory services 2.7 2.6 Other services 1.5 0.1
Note 8. Leases
Nynas leases a large number of tanks. depots. vessels. properties expensing over the lease term. The existence of leases with cars etc for its own use. The lengths of leases for the different an original lease term of no more than 12 months, so-called properties vary depending on the type of leased assets. The short-term leases, is considered to be insignificant and they will average remaining lease terms are between 4–10 years. The also continue to be reported with linear expensing over the leases originally have an agreed term which is normally 3–5 lease term. years except for land and vessels where the leases period can The leasing liability and right-of-use asset is calculated by extend more then 10 years. Thereafter the leases often continue using the implicit rate in the contract. If the implicit rate cannot for a term of between 12 and 36 months if neither the lessor be identified the incremental borrowing rate is instead applied, nor Nynas terminates the lease. Otherwise there is a contractual which is the interest rate the company had been given if the extension option that is normally 1 to 3 years. It is not unusual investment had been financed through a loan from a financial at the end of a lease term for the lease to be terminated for rene- institute, in 2019 estimated at 5,5 per cent. gotiation by Nynas, the property owner or both parties. For a specification of the right-of-use assets see Note 13 Leases with a lower value (<5000 USD) will not be included in Property, plant and equipment, Note 6 Depreciation/amortization the lease liability but will continue to be reported with a linear and for interest expense see Note 9 Net Financial items.
LEASE LIABILITY MATURITY STRUCTURE
2020 300.9 2021 282.6 2022 247.6 2023 231.4 2024 270.0 2025 and later 228.1 TOTAL PAYMENTS 1,560.6 Discounting effect -211.8 TOTAL LIABILITY ACCORDING TO 1,348.8 BALANCE SHEET of which current liability 300.9 of which non-current liability 1,047.9
LEASE LIABILITY MATURITY STRUCTURE
Payments of leases entered as liabilities 360.6 Variable lease payments not included in lease liability 14.9 TOTAL LEASE PAYEMENTS 375.5
57 NYNAS ANNUAL REPORT 2019 NOTES
Note 9. Net financial items
2019 2018
Interest income, bank deposits 30.0 5.7 Interest income, joint ventures 0.1 0.4 Interest income, derivative instruments (actual interest rates) 1.7 15.1 TOTAL FINANCE INCOME 31.8 21.2
Of which total interest income attributable to items carried at amortised cost 30.1 6.1
Interest expense, loans and bank overdrafts -387.6 -337.9 Interest expense, derivative instruments (actual interest rates and changes in value) -10.1 -17.5 Interest expense, interest bearing accounts payable -174.2 – Interest expense, PRI pension obligations -7.9 -7.3 Interest expense, lease -71.2 – Sales of shares in subsidaries -0.4 – Net exchange differences -26.1 11.1 Other finance costs* -129.4 -83.5 TOTAL FINANCE COSTS -806.8 -435.1
Of which total interest expense attributable to items carried at amortised cost -569.7 -345.2 TOTAL NET FINANCIAL ITEMS -775.0 -413.9
* Mainly relates to up front fee.
Note 10. Taxes
2019 2018
Current tax -111.6 -113.3 Current tax. prior years 2.2 33.4 Deferred tax -89.0 -121.8 TOTAL -198.3 -201.7
Tax on the Group’s profit before tax differs from the theoretical figure that would have resulted from a weighted average rate for the results in the consolidated companies as follows: 2019 2018
Result before tax -2,481.8 -591.6 Tax according to Parent Company’s applicable tax rate 531.1 130.2 Effect of different tax rates for foreign subsidiaries -5.9 -10.6 TAX EFFECT OF: Other non-deductible expenses -96.4 -13.7 Other non-taxable income 23.0 14.8 Adjustment of current tax in respect of prior years 2.2 33.4 Increase/decrease in tax carryforwards without corresponding capitalisation of deferred tax -341.3 -208.1 Impairment tangible assets -260.4 – Change in valuation of tax carryforwards -42.5 -150.1 Tax attributable to Joint Venture 5.4 2.6 Other -13.6 -0.2 RECOGNISED TAX EXPENSE -198.3 -201.7
Standard rate of income tax. % 21.4 22.0 Effective tax rate. % -19.7 -34.1
58 NYNAS ANNUAL REPORT 2019 NYNAS ANNUAL REPORT 2019 NOTES NOTES
Con’t. Note 10
Assets Liabilities Net DEFERRED TAX ASSETS AND LIABILITIES 2019 2018 2019 2018 2019 2018 Land and buildings 0.0 0.0 8.7 9.7 -8.7 -9.7 Machinery and equipment 10.7 10.2 37.5 57.3 -26.8 - 47.1 Inventories 0.0 1.7 24.8 0.0 -24.8 1.7 Other operating receivables/liabilities 3.8 46.7 0.3 115.5 3.5 -68.8 Pension liabilities 163.6 169.5 12.5 0.0 151.1 169.5 Tax loss carryforwards 17.8 66.9 0.0 0.0 17.8 66.9 TOTAL 195.9 295.0 83.8 182.5 112.1 112.5 Offsets 0.1 4.0 0.1 4.0 – – TOTAL 196.0 299.0 84.0 186.5 112.1 112.5
CHANGE IN DEFERRED TAX ON TEMPORARY Recognised Recognised DIFFERENCES DURING YEAR Opening in income directly in Exchange Closing 2019 Balance statement equity Acquisition differences Balance
Land and buildings -9.7 1.0 – – – -8.7 Machinery and equipment - 47.1 20.3 – – – -26.8 Inventories 1.7 -26.5 – – – -24.8 Other operating receivables/liabilities -68.8 -30.9 103.2 – – 3.5 Pension liabilities 169.5 -3.7 -14.4 0.0 -0.3 151.1 Tax loss carryforwards 66.9 -49.1 0.0 0.0 – 17.8 TOTAL 112.5 -89.0 88.8 0.0 -0.3 112.1
2018
Land and buildings -7.4 -2.3 – – – -9.7 Machinery and equipment -65.2 18.1 – – – - 47.1 Inventories -4.4 6.1 – – – 1.7 Other operating receivables/liabilities 69.6 13.0 -151.4 – – -68.8 Pension liabilities 179.1 -13.6 3.6 0.0 0.4 169.5 Tax loss carryforwards 209.9 -143.0 0.0 0.0 – 66.9 TOTAL 381.7 -121.8 -147.8 0.0 0.4 112.5
The Group did not recognize deferred tax assets of 720 (514) million in respect of losses amounting to SEK 3,327(2.334) million, which can be used against future taxable profit. All of the SEK 3,327 million is available for use in the future indefinitely. The Group has neither recognized deferred tax.
Note 11. Earnings per share
The calculation of earnings per share is based on profit attributable to equity-holders of the Parent Company. The average number of shares in 2019 and 2018 was 67,532.
2019 2018 Profit for Number Profit for Number the year of shares Per share the year of shares Per share
Earnings per share -2,680.2 67,532 -39,688 -793.3 67,532 -11,747
As Nynas does not have, and did not have during the year, any outstanding convertible and subscription warrant programmes, no dilution effects arose during calculation of earnings per share.
59 NYNAS ANNUAL REPORT 2019 NOTES
Note 12. Intangible assets
Supply contracts/ Computer Other intang. Total Intangible 2019 Goodwill Customer lists software assets / Trademarks Assets
Opening cost 198.7 364.0 473.9 1.6 1,038.3 Acquisitions – – 10.4 – 10.4 Disposals – – -0.4 – -0.4 Reclassifications – – 7.3 – 7.3 Translation differences – – 0.4 – 0.4 CLOSING COST 198.7 364.0 491.6 1.6 1,055.9
Opening regular depreciation -190.0 -237.0 -383.6 -1.6 -812.2 Disposals – – 0.4 – 0.4 Translation differences – – -0.4 – -0.4 Amortisation for the year – – -21.9 – -21.9 CLOSING REGULAR -190.0 -237.0 -405.6 -1.6 -834.2 DEPRECIATION
Opening impairment -0.6 -127.0 -24.2 – -151.8 Translation differences 0.0 – -0.1 – -0.1 CLOSING IMPAIRMENT -0.6 -127.0 -24.2 – -151.9
CARRYING VALUE 8.1 0.0 61.8 0.0 69.8
Supply contracts/ Computer soft- Other intang. Total Intangible 2018 Goodwill Customer lists ware assets/ Trademarks Assets
Opening cost 275.4 354.5 464.4 1.6 1,095.9 Acquisitions – – -0.6 – -0.6 Disposals -78.3 – -12.0 – -90.2 Reclassifications – – 21.5 – 21.5 Translation differences 1.6 9.5 0.6 0.0 11.7 CLOSING COST 198.7 364.0 473.9 1.6 1,038.3
Opening regular depreciation -264.0 -227.5 -369.6 -1.6 -862.7 Disposals 78.3 11.8 90.1 Translation differences -4.3 -9.5 -0.6 0.0 -14.4 Amortisation for the year – – -25.2 – -25.2 CLOSING REGULAR -190.0 -237.0 -383.6 -1.6 -812.2 DEPRECIATION
Opening impairment -3.3 -127.0 -24.5 – -154.8 Translation differences 2.7 – 0.3 – 3.0 CLOSING IMPAIRMENT -0.6 -127.0 -24.2 – -151.8
CARRYING VALUE 8.1 0.0 66.1 0.0 74.2
60 NYNAS ANNUAL REPORT 2019 NYNAS ANNUAL REPORT 2019 NOTES NOTES
Note 13. Tangible assets
Total Plant and Construction tangible 2019 Buildings machinery Equipment in progress assets
Opening cost 544.1 9,723.7 551.6 399.0 11,218.5 Acquisitions 0.8 336.3 1.7 243.2 582.0 Disposals – -0.5 -1.1 – -1.6 Reclassifications 10.7 171.7 27.5 -217.2 -7.3 Translation differences 6.8 119.8 5.7 1.5 133.8 CLOSING COST 562.5 10,351.0 585.4 426.5 11,925.4
Opening regular depreciation -255.4 -5,144.1 -416.0 – -5,815.5 Depreciation adjustment – – – – 0.0 Disposals – 0.5 1.0 – 1.5 Translation differences -2.7 -71.2 -4.2 0,0 -78.1 Depreciation for the year -18.6 -561.3 -37.6 0,0 - 617.5 CLOSING REGULAR DEPRECIATION -276.7 -5,776.1 -456.7 0,0 -6,509.5
CLOSING RESIDUAL VALUE 285.8 4,574.9 128.7 426.5 5,415.9 Opening impairment -12.6 -76.2 -2.8 -36.0 -127.7 Impairment for the year – -1,217.0 – – -1,217.0 Translation differences -0.9 – -0.3 – -1.2 CLOSING IMPAIRMENT -13.5 -1,293.2 -3.1 -36.0 -1,345.8
CARRYING VALUE 272.3 3,281.7 125.6 390.5 4,070.1 Of which carrying amount. Sweden 201.0
Tank and Building and Total right-of 2019 depots Vessels office space Other use assets
Opening cost 1,088.6 426.2 46.2 47.0 1,608.0 Amended and new leases 1.3 218.2 2.0 2.2 223.7 Divested and terminated leases -5.4 -182.4 -1.6 -0.1 -189.4 Depreciation for the year -234.8 -78.7 -14.0 -11.7 -339.2 Translation differences 4.8 – -0.2 0.3 4.9 CARRYING VALUE 854.6 383.2 32.5 37.7 1,307.9
61 NYNAS ANNUAL REPORT 2019 NOTES
Con’t. Note 13
Total Plant and Construction tangible 2018 Buildings machinery Equipment in progress assets
Opening cost 554.1 9,271.2 549.2 411.5 10,786.1 Acquisitions 5.2 1,645.4 20.9 -1,272.6 398.9 Disposals -25.0 -16.2 -42.5 0.0 -83.8 Reclassifications 2.4 -1,298.0 18.8 1,253.0 -23.8 Translation differences 7.4 121.4 5.1 7.2 141.1 CLOSING COST 544.1 9,723.7 551.6 399.0 11,218.5
Opening regular depreciation -253.0 -4,566.5 -421.8 – –5,241.3 Disposals 25.0 16.0 42.2 – 83.2 Depreciation reclassification – – 2.5 – 2.5 Translation difference -4.4 -27.1 -6.2 – –37.7 Depreciation for the year -23.0 -566.5 -32.7 – –622.2 CLOSING REGULAR DEPRECIATION -255.4 -5,144.1 -416.0 – -5,815.5
CLOSING RESIDUAL VALUE 288.7 4,579.7 135.6 399.0 5,403.0 Opening impairment -12.2 -74.6 -2.8 -36.0 -125.7 Impairment for the year – – – – 0.0 Translation differences -0.4 -1.6 – – -2.0 CLOSING IMPAIRMENT -12.6 -76.2 -2.8 -36.0 -127.7
CARRYING VALUE 276.1 4,503.4 132.8 363.0 5,275.4 Of which carrying amount. Sweden 190.3
Impairment testing of tangible assets An impairment loss of SEK 1,217 million has been recognized for The recoverable amount for cash-generating units is determined the Group, mainly due to NSP refinery assets value in use was by calculating the value in use. These calculations use estimated higher than net realizable value, the impairment loss valuation is future cash flows which are based the budget and long-term based on future discounted cash flows (based on a WACC at 9 business plans (five years) that have been approved by manage- per cent) according to the business plan. The impairment loss of ment and the board. SEK 1,217 million is accounted for under cost of sales. The cash-flows after the 5-year planning period are extrapo- If the business plan should not be fulfilled or an increase in lated using an estimated growth rate with a residual value at the the assumed WACC, future substantial impairment losses could end. be foreseen. Significant assumptions used to calculate the value in use:
2019 2018
Gross margin, %* 2.5 2.5 Rate of growth, %** 2.0 2.0 Discount rate, %*** 9.0 8.5
* Budgeted gross margin. ** Weighted average rate of growth used to extrapolate cash flows outside budget period. *** Pre-tax discount rate used in present value calculation of projected future cash flows.
62 NYNAS ANNUAL REPORT 2019 NYNAS ANNUAL REPORT 2019 NOTES NOTES
Note 14. Shares in Group companies
2019 2018
Opening cost 2.876.9 2.876.9 Contribution in cash 1 – – Liquidation -0.3 Impairment of shares in subsidary – – CLOSING COST 2.876.6 2.876.9
1) No contribution has been made during 2019 and 2018.
GROUP COMPANIES: Number of % Carrying (SEK thousands) Reg. no Reg’d office shares Holding Currency amount
Nynas UK AB. Sweden 556431-5314 Stockholm 1,000 100 SEK 625,176 Nynas Oil Import AB 556726-8841 Stockholm 1,000 100 SEK 100 Nynäs AB 1 556366-1957 Stockholm 1,000 100 SEK 100 Nynas Ltd. UK 02359113 London 7,647,888 100 GBP 92,323 Nynas Insurance Company Ltd. Bermuda #11005 Hamilton 91,800 100 SEK 8,349 Nynas A/S. Denmark A/S 66679 Copenhagen 1,000 100 DKK 36,461 Nynas A/S. Norway 962022316 Drammen 5,400 100 NOK 50,017 AS Nynas. Estonia 10028991 Tallinn 13,600 100 EEK 5,891 Nynas SA. France 328o31232ooo49 Bobigny 10,994 99.95 EUR 2,872 Nynas Petroleo SA. Spain esa78474475 Madrid 49,916 100 EUR 4,534 Nynas Srl. Italy 1249541 Milan 50,000 100 EUR 1,850 Nynas GmbH. Germany 121304433 Düsseldorf 1 100 EUR 2,105 Nynas Pty Ltd. Australia ACN076.139.029 Brisbane 10,000 100 AUD 54 Nynas Sp. z o.o.. Poland KRS:0000106219 Szczecin 430 100 PLN 1,614 Nynas (South Africa) (Pty) Ltd. South Africa 97/13041-07 Johannesburg 100 100 ZAR – Nynas do Brasil Ltda. Brasilia 02331563/0001 Sao Paolo 10,000 100 BRL 584 Nynas Canada Inc. Canada 870209335 Toronto 10,000 100 CAD 1,001 Nynas Naphthenics Yaglari Ticaret Ltd Sti. Turkey 632 011 3964 Istanbul 38,489 100 TRL 4,808 Nynas Mexico SA. Mexico NME010316RF1 Mexico City 50,000 100 MXN 2,910 Nynas Servicios SA. Mexico NSE010316NM1 Mexico City 50,000 100 MXN 115 Nynas Argentina SA. Argentina 30707778209 Buenos Aires 15,000 100 ARS 181 Nynas Technol Handels GmbH. Austria FN219950 Graz 1 100 EUR 323 Nynas Petroleum Shanghai Co.. Ltd. China 315137 Shanghai 1 100 CNY 2,071 Nynas Baltic Sweden AB. Sweden 556625- 4511 Stockholm 1,000 100 SEK 37 Nynas Belgium AB. Sweden 556613-4473 Stockholm 1,000 100 SEK – Nynas NV. Belgium 893.286.262 Zaventem 1 0.01 EUR – Nynas PTE. Ltd. Singapore 200723567N Singapore 36,720 100 SGD 217 Nynas AG. Switzerland CH-170.3.025.994-5 Zug 79,998 99.99 CHF – Nynas Inc. USA 800197875 Delaware 100 100 USD 36,693 Nynas OY. Finland 1834987-6 Vantaa 100 100 EUR 125 PT Nynas Indonesia. Indonesia 21.069.383.4-417.000 Jakarta 150,000 100 IDR 1,258 Nynas Naphthenics Private Ltd. India US1109MH2009FTLI95149 Mumbai 1,000,000 100 INR 753 Nynas Colombia S.A.S NIT 901.011.627-3 Bogotá 1,000,000 100 COP 2,770 Nynas Germany AB 556858-4170 Stockholm 500 100 SEK 1,991,297 TOTAL INVESTMENTS IN GROUP COMPANIES 2,876,590
1) Dormant
63 NYNAS ANNUAL REPORT 2019 NOTES
Con’t. Note 14
INDIRECT HOLDINGS IN OPERATING Number of % GROUP COMPANIES Reg. no Reg’d office shares Holding Currency
Nynas Naphthenics Ltd, UK 2450786 Guildford 10,000 100 GBP Nynas Limited Liability Company 1087746838464 Moscow 10,000 100 SEK Nynas NV, Belgium 893.286.262 Zaventem 11,090 99.99 EUR Nynas Bitumen Limited 982640 Cheshire 1,000,000 100 GBP Highway Emulsions Limited 2643238 Cheshire 2 100 GBP Nynas Verwaltungs GmbH HR A 117766 Hamburg 25,000 100 EUR Nynas GmbH & Co KG HR A 114916 Hamburg 1 100 EUR
Nynas UK AB has a branch in the UK. During 2017 Nynas NV closed its branches in Germany and France.
Note 15. Investments in joint ventures
Number of Carrying GROUP Reg. no Reg’d office shares Holding % Currency amount
Eastham Refinery Ltd, UK 2205902 London 5,000,000 50 GBP 129.8 Share in equity of Eastham Refinery Ltd accounted for using equity method 59.1 TOTAL INVESTMENTS IN ASSOCIATES AND JOINT VENTURES 188.9
GROUP’S INTEREST IN THE ASSOCIATES AND JOINT VENTURES ERL Assets Liabilities Income Profit
Eastham Refinery Ltd, UK 254.6 62.5 145.9 19.8
2019 2018
Opening balance 129.8 93.9 Profit for the year 20.1 21.5 Dividend and capital contribution 36.8 -1.4 Translation differences 2.2 15.8 CLOSING BALANCE 188.9 129.8
Note 16. Other long-term receivables
2019 2018
Opening balance 3.9 3.6 Amounts to be received 10.7 0.4 CLOSING BALANCE 14.6 3.9
Note 17. Inventories
2019 2018
Raw materials 1,124.6 1,508.8 Semi-finished products 525.7 517.9 Finished products 2,746.1 2,977.4 TOTAL 4,396.4 5,004.1
Amounts relating to impairment losses on inventories are reported Impairment of inventory value per end of 2019 have been done, under costs of goods sold and are SEK 0 (0) million. no need for write down exists. Inventories are stated at the lower of cost and net realisable value, with due consideration of obsolenscence.
64 NYNAS ANNUAL REPORT 2019 NOTES
Note 18. Accounts receivable
2019 2018 Loss Net carrying Loss Net carrying Gross allowance amount Gross allowance amount
Current receivables 940.3 -1.1 939.3 861.2 -0.9 860.3 Past due 1–30 days 292.1 -10.1 282.0 263.5 -0.6 262.9 Past due 31–90 days 217.6 -41.9 175.7 87.5 -0.6 86.9 Past due 91–180 days 89.0 -13.3 75.7 61.4 -2.7 58.7 Past due 181–360 days 38.3 -15.0 23.3 55.6 -2.2 53.5 Past due over 360 days 82.4 -73.0 9.5 9.4 -6.2 3.2 Bankrupcy 0.0 -3.5 -3.5 0.0 -1.7 -1.7 TOTAL ACCOUNTS RECEIVABLES 1,659.8 -157.8 1,502.0 1,338.6 -14.8 1,323.8
Performance obligation a provision matrix by reference to past default experience of the Revenue is recognized when control passes to the customer. A debtor and an analysis of the debtor’s current financial position, customer obtains control when they have the ability to direct the adjusted for factors that are specific to the debtors, general use of the asset (goods / products) and to obtain substantially economic conditions of the industry in which the debtors operate all of the benefits embodied in the same. In most cases this will and an assessment of both the current as well as the forecast be the same point in time as when risks and rewards passes direction of conditions at the reporting date. and therefore there will be no change in the timing of revenue The average credit period on sales of goods is 36.5 days. recognition. No interest is charged on outstanding trade receivables. Nynas always measure the loss allowance for trade receivables at an Factoring amount equal to lifetime ECL. The Group writes off a trade The Group have applied factoring for a limited part of the receivable when there is information indicating that the debtor is invoicing. in severe financial difficulty and there is no realistic prospect of At year-end 2019, the part used as Factoring is approximately 12 recovery, e.g. when the debtor has been placed under liquidation percent and has been accounted for as off balance sheet. or has entered into bankruptcy proceedings, or when the trade receivables are over 365 days past due, whichever occurs earlier. Loss allowance Accounts receivable not covered by insurance amounts to 25 Nynas has moved from an incurred loss model to an expected % during end of 2018 (28 %). Since approx. 68 % of all sales loss model with an earlier recognition of impairment. Nynas in the group during the year is covered by the credit insurance applies the simplified approach for trade receivables. The Nynas will only determine an expected credit loss model on sales expected credit losses on trade receivables are estimated using that is uninsured.
Note 19. Prepayments and accrued income
2019 2018
Rent 9,1 6,3 Charter hire 37,2 38,7 Pension premiums 5,2 5,5 Software licences 13,8 11,2 Prepayment crude purchase 171,7 – Other prepayments 124,1 95,1 TOTAL 361,1 156,8
65 NYNAS ANNUAL REPORT 2019 NOTES
Note 20. Cash and cash equivalents
2019 2018
Cash and bank balances 1,668.7 844.5 Restricted cash account 27.3 0.0 CASH AND CASH EQUIVALENTS RECOGNISED 1,696.0 844.5
The Group’s cash & cash equivalents comprise its deposits in the Group’s common bank accounts and other bank accounts, including currency accounts and funds in transit.
Note 21. Equity
SPECIFICATION OF EQUITY ITEM ’RESERVES’, TRANSLATION RESERVE AND CURRENCY HEDGES 2019 2018
Opening translation reserve and currency hedges of net investments -209.0 -199.8 Translation reserve and currency hedges of net investments for the year 26.3 -9.2 CLOSING TRANSLATION RESERVE AND CURRENCY HEDGES OF NET INVESTMENTS -182.7 -209.0
TOTAL RESERVES Opening reserves -103.5 - 607.5 Changes in reserves during the year -523.9 504.0 CLOSING RESERVES -627.4 -103.5
Reserves Retained earnings Translation reserve Retained earnings and net profit for the year include accumu- The translation reserve covers all exchange differences arising lated net profits of the Parent Company and its subsidiaries and on the translation of the financial statements of foreign entities associates. which are presented in a currency other than the Group’s pres- entation currency. Share capital The Parent Company and Group present their financial state- In accordance with Nynas AB’s articles of association, share ments in Swedish kronor. capital shall amount to a minimum of SEK 52,000,000 and a maximum of SEK 208,000,000. All shares are fully paid and carry Hedging reserve equal voting power and an equal share in the Company’s assets. The hedging reserve comprises the effective portion of the Two classes of share are issued - A shares, maximum SEK cumulative net change in the fair value of a cash flow hedging 103,999,000. and B shares, maximum SEK 104,001,000. instrument attributable to hedged transactions that have not yet Share capital comprises SEK 33,765,000 in A shares and SEK occurred. 33,767,000 in B shares. For more information see page 37, Cor- porate Governance. The par value per share is SEK 1.000.
DISTRIBUTION OF SHARE CAPITAL 2019 2018
CHANGE IN TOTAL NUMBER OF SHARES Opening number 67,532 67,532 Change during the year 0 0 CLOSING NUMBER 67,532 67,532
2019 2018 Number of Number of Class of share shares % shares %
Class A 33,765 50 33,765 50 Class B 33,767 50 33,767 50 TOTAL 67,532 100 67,532 100
66 NYNAS ANNUAL REPORT 2019 NYNAS ANNUAL REPORT 2019 NOTES NOTES
Con’t. Note 21
A dividend is proposed by the Board in accordance with the amounted to SEK 46 (3,250) million at the end of the year. The Swedish Companies Act and is adopted by the annual general return on equity was -162.6 (-23.4) per cent. meeting. The proposed, but not yet adopted, dividend for 2019 Nynas has defined a financial goal of securing long-term is SEK 0 (0) per share. Based on the number of shares at Decem- growth and maximising the value of its assets. The Board has ber 31, 2019, this represents a total dividend of SEK 0 million. given the Nynas management group scope for growth and development according to Nynas’s strategy by means of self- Capital management financing and payment of dividends to shareholders as adopted The Group’s equity, which is defined as total recognised equity, by the annual general meeting.
Note 22. Provisions for pensions
The Group’s employees, former employees and their survivors Some of the white-collar workers in Sweden is safeguarded by may be covered by defined contribution and defined benefit the ITP2 plan defined benefit pension obligations for age- and plans relating to post-employment benefits. The defined benefit family pension (alternative family pension) through an insurance by plans cover retirement pension and survivors’ pension. Alecta. According to a statement from Swedish Financial Report- For the defined contribution plans, continous payments to ing Board, UFR 10 the classification for ITP plans, which is financed authority and to independent bodies is done therefore they take by insurance by Alecta, is this a defined benefit plan that comprise over the obligations towards the employees. several employers. For the financial year 2019 (as in 2018) the com- The obligation reported in the balance sheet is derived from pany did not have access to all information to be able to disclose the defined benefit plans. The largest plans are in Sweden, the their proportional share of the obligation of the plan, the plan United Kingdom, Belgium and Germany. The plans are covered assets and the cost of adminstration, which result in that it has not by a re-insured provision in the balance sheet and by pension been possible to account for the plan as a definded benefit plan. benefit plans and funds. The calculations are based on the The pension plan ITP2 which is safeguarded through an insurance projected unit credit method using the assumptions shown in the by Alecta is therefore accounted as a defined contribution plan. table on page 87. The premium for the defined benefit age- and family pension is Calculations of defined benefit plans have been done by an individual and calculated based on salary, earlier earned pension independent external actuary. and expected remaining period of service. Nynas’s forecast payment of pensions in relation to defined Expected fee for next reporting period for ITP2 insurances that benefit plans, both funded and unfunded, amounts to SEK 72.8 is effected in Alecta amount to 0 MSEK (11.7 MSEK). (42.5) million for 2020. The collective consolidation level consist of the market value The pension cost and other defined benefit remunerations is on the assets in Alecta, in per cent of insurance obligations cal- to be found in the income statement under the headings Cost of culated in accordance with the insurance technical methods and Goods Sold 76.7 MSEK (55.4 MSEK), sales cost 19.3 MSEK (22.0 assumptions by Alecta, which not correspond with IAS 19. The MSEK) and administration cost 23.5 MSEK (30.0 MSEK). The collective consolidation level shall normally be allowed to vary interest part in the pension cost together with the part of the between 125 and 155 per cent. return on plan assets that not is accounted for in Other compre- If the collective consolidation level in Alecta will be below 125 hensive income will be shown in the financial income/expenses. per cent or exceed 155 per cent shall action be taken in purpose to make assumptions so the consolidation level will revert to the Sweden normal interval. At low consolidation level one action can be Labourer comprise by the SAF / LO plan which is a defined to increase the agreed fee for new take out and / or increase of contribution pension plan based on collective agreements and existing benefits. is comprehended by several employers within several brances. At high consolidation level one action can be to implement White-collar workers is comprises by the ITP plan, which also is premium reductions. based on collective agreements and comprise several employers At the end of the year, Alecta’s surplus, in the form of a collec- within several branches. tive consolidation level, was 148 (142) per cent. The ITP plan have two parts, the ITP1, a defined contribution pension plan which is valid for employees born 1979 or later, as UK well as ITP2, a defined contribution pension plan which is valid The Nynas UK Pension Scheme is a career average defined bene- for employees born before 1979. The major part of the ITP2 fit plan which is a registered pension scheme under the Finance plan is managed by Nynas i their own management within the Act 2004. FPG / PRI system. The Scheme operates under trust law and is administered by The financing take place through a provision which is safe- the Trustees on behalf of the members in accordance with the guarded by a credit insurance in Försäkringsbolaget PRI Pension terms of the Trust Ded and Rules and relevant legislation. The guarantee. One part of the ITP2 plan is safeguarded through an Scheme´s assets are held by the trust. insurance within Alecta (see below). Annual increases on benefits in payment are dependent on infla- In Nynas AB, there is in excess of above obligations other tion so the main uncertainties affecting the level of benefits payable defined benefit obligations applied to individual pensions agree- under the Scheme are future inflation levels (including the impact of ments to earlier employees and pensions to senior executives. inflation on future salary increases) and the actual longevity.
67 NYNAS ANNUAL REPORT 2019 NOTES
Con’t. Note 22
The main risk the Company runs in respect of the Scheme is that Plan RO 1979 additional contributions are required if the investment returns are Pensionable incidents: Pension for old age, early retirement not sufficient to pay for the benefits (which will be influenced by according to social security regulations, in case of invalidity and the factors mentioned above). The level of equity returns will be for spouses in case of death (60%). a key determinant of overall investment return; the investment To get a claim, the pensionable incident has to be at least 10 portfolio is also subject to a range of other risks typical of the years after receiving the pension promise. asset classes held, in particular credit risk on bonds. The claim depends on years of service and final pay - per year of service determined percentages are granted for the parts of Germany the salary below (0,5%) and above the social security ceiling For Nynas Germany there are five pension plans in place, all (1,7%). The sum of all percentages at the pensionable incident closed for new entrants. determines along with the last salary the total claim. The claim is not funded externally in any way, all claims go In case of invalidity all theoretical years until reaching the age against the company directly. 60 are granted for determining the claim at any given time of The present value of the whole liability is calculated according invalidity. to German/International actuarial standards and shown as such The total claim is limited to 75% of the last salary. in the balance sheets. Plan RO 1989 Plan DSPR Pensionable incidents: Pension for old age, early retirement Pensionable incidents: Pension for old age, early retirement according to social security regulations, in case of invalidity and according to social security regulations, in case of invalidity and for spouses in case of death (60%). for spouses in case of death (60%) To get a claim, the pensionable incident has to be at least 10 Claim depends on years of service and final pay - per year of years after receiving the pension promise. service a determined percentage is granted (between 1,9% and The claim depends on years of service and final pay - per year 2,5%). The sum of all percentages at the pensionable incident of service determined percentages are granted for the parts of determines along with the last salary the total claim. the salary below (0,5%) and above the social security ceiling In case of invalidity all theoretical years until reaching the (1,7%). The sum of all percentages at the pensionable incident pension age are granted for determining the claim at any given determines along with the last salary the total claim. time of invalidity. In case of invalidity all theoretical years until reaching the age The total claim thereby amounts up to 75% of the last salary, 60 are granted for determining the claim at any given time of social security pension lessens the claim flush. invalidity. The total claim thereby amounts up to 17,5% for the part Plan DSPS of the salary below the social security ceiling and up to 59,5% Pensionable incidents: Pension for old age, early retirement beyond. according to social security regulations, in case of invalidity and for spouses in case of death (60%). DSPO The claim depends on years of service and final pay - per year Pensionable incidents: Pension for old age, early retirement of service determined percentages are granted for the parts of the according to social security regulations, in case of invalidity and salary below (0,65%) and above the social security ceiling (1,7%). for spouses in case of death (60%). The sum of all percentages at the pensionable incident deter- Per each year of service a determined claim is granted. The mines along with the last salary the total claim. amount of the claim depends on each years salary and a conver- In case of invalidity all theoretical years until reaching the sion table. pension age are granted for determining the claim at any given Every individual claim is saved per year to accumulate to the time of invalidity. final claim when a pensionable incident happens. The total claim thereby amounts up to 22,75% for the part In case of invalidity all theoretical years until reaching the of the salary below the social security ceiling and up to 59,5% pension age are granted for determining the claim at any given beyond. time of invalidity.
2019 REPORTED AS PROVISIONS FOR PENSIONS IN THE STATEMENT OF FINANCIAL POSITION Sweden UK Belgium Germany Total
Present value of funded obligations 14.6 1,094.1 75.5 0.0 1,184.2 Fair value of plan assets -21.3 -1,241.4 -60.0 – -1,322.7 Deficit/(surplus)of funded plans -6.7 -147.3 15.5 – -138.5 Present value of unfunded obligations 522.1 – 0.0 729.5 1,251.6 Total deficit/(surplus) in defined benefit plans 515.4 -147.3 15.5 729.5 1,113.1 Effects of minimum funding requirements/asset ceilieng – – – – 0.0 NET LIABILITY RECOGNISED IN STATEMENT 515.4 -147.3 15.5 729.5 1,113.1 OF FINANCIAL POSITION Portion of pension liability recognised as provisions for pensions 515.4 – 15.5 729.5 1,260.4 Portion recognised as financial fixed asset – -147.3 – – -147.3
68 NYNAS ANNUAL REPORT 2019 NYNAS ANNUAL REPORT 2019 NOTES NOTES
Con’t. Note 22
2018 Sweden UK Belgium Germany Total
Present value of funded obligations 14.3 952.7 62.4 – 1,029.4 Fair value of plan assets -22.9 -1,031.8 -59.2 – -1,113.8 Deficit/(surplus)of funded plans -8.5 -79.1 3.2 – -84.4 Present value of unfunded obligations 456.4 – 0.1 557.1 1,013.7 Total deficit/(surplus) in defined benefit plans 447.9 -79.1 3.4 557.1 929.3 Effects of minimum funding requirements/asset ceilieng – – – – 0.0 NET LIABILITY RECOGNISED IN STATEMENT OF 447.9 -79.1 3.4 557.1 929.3 FINANCIAL POSITION Portion of pension liability recognised as provisions for pensions 447.9 – 3.4 557.1 1,008.4 Portion recognised as financial fixed asset – -79.1 – – -79.1
CHANGE IN PRESENT VALUE OF DEFINED BENEFIT OBLIGATION 2019 2018
Present value of defined benefit obligation at beginning of year 2,043.1 1,949.9 Current service cost 57.4 58.0 Interest cost/(credit) 51.0 49.8 (Gain)/loss on part service cost, curtailment and settlement -9.7 2.3 Special payroll tax in income 7.1 6.4 (Gain)/loss on changes in demograpic assumptions 0.0 -57.5 (Gain)/loss on changes in financial assumptions 288.4 17.9 Experience (gain)/loss -16.6 -7.5 Acquisition 0.0 0.0 Special payroll tax related to remeasurements 8.3 7.6 Employee contributions 2.8 2.7 Benefits paid -70.1 -38.5 Payments of special payroll tax -5.4 -4.6 Exchange rate (gain)/loss 78.4 56.6 PRESENT VALUE OF DEFINED BENEFIT OBLIGATION AT END OF YEAR 2,434.8 2,043.1
COSTS RECOGNISED IN INCOME STATEMENT 2019 2018
Defined benefit pension plans: Current service cost 57.4 58.0 Interest cost/(credit) 15.6 16.9 (Gain)/loss on part service cost, curtailment and settlement -9.7 2.3 Special payroll tax 7.1 6.4 Other 2.4 2.3 TOTAL COST OF DEFINED BENEFIT PAYMENTS RECOGNISED IN INCOME STATEMENT 72.9 86.0
Defined contribution pension plans: Costs for defined contribution plans 46.6 38.5 TOTAL PENSION EXPENSE RECOGNISED IN INCOME STATEMENT 119.5 124.5
EXPENSES RECOGNISED IN OTHER COMPREHENSIVE INCOME 2019 2018
Return on plan assets in excess of the amount included in interest cost/(credit) -151.3 60.8 (Gain)/loss on changes in demograpic assumptions 0.0 -57.5 (Gain)/loss on changes in financial assumptions 288.4 17.9 Experience (gain)/loss -16.6 -7.5 Change in assets ceiling in excess of the amount included in interest cost/(credit) 0.0 -12.8 Special payroll tax related to remeasurements 8.3 7.6 TOTAL EXPENSES FOR DEFINED BENEFIT REMUNERATION RECOGNISED 128.9 8.5 IN OTHER COMPREHENSIVE INCOME
69 NYNAS ANNUAL REPORT 2019 NOTES
Con’t. Note 22
The main actuarial assumptions used (in %) are as follows:
2019 2018 Sweden UK Belgium Germany Sweden UK Belgium Germany
Discount rate 1.6 2.0 0.6 1.2 2.4 3.1 1.8 2.0 Future salary increases 2.0 N/A 2.8 2.5 2.4 N/A 2.8 2.5 Future pension 1.8 2.9 1.8 1.8 2.0 3.5 1.8 1.8 increases Expected remaining 10.0 N/A 16.0 20.0 10.0 N/A 17.0 19.0 service period
UK Mor- UK Mor- tality table tality table PCA00 PCA00 CMI2017 CMI2017 with long with long term rates German term rates German of impor- Mortal- of impor- Mortal- vement of ity table vement of ity table 1.5% for Belgian Richttafeln 1.5% for Belgian Richttafeln Males and Mortality Heubeck Males and Mortality Heubeck Swedish 1.0% for table MR/ 2018 G Swedish 1.0% for table MR/ 2018 G Life expectancy DUS14 w-c Females FR (statutory) DUS14 w-c Females FR (statutory) Duration 22 18 12 30 22 19 12 29
CHANGE IN FAIR VALUE OF PLAN ASSETS DURING THE YEAR 2019 2018
Fair value of plan assets at beginning of year 1,113.8 1,124.4 Interest cost/(credit) 35.4 32.8 Past service cost, curtailment and settlement gain or losses 0.0 0.0 Return on plan assets in excess of the amount included in interest cost/(credit) 151.3 -60.8 Administrative costs -2.4 -2.3 Employer contributions 9.7 10.5 Employee contributions 2.8 2.7 Benefits paid -62.0 -31.1 Exchange rate (gain)/loss 74.2 37.6 FAIR VALUE AT END OF YEAR 1,322.7 1,113.8
PLAN ASSETS 2019 2018
Shares and participating interests 769.3 687.9 Interest-bearing securities 431.4 325.3 Property Sweden 2.3 2.4 Insurance 60.0 59.2 Cash and cash equivalents, bank deposit 59.7 39.0 FAIR VALUE OF PLAN ASSETS 1,322.7 1,113.8
Plan assets do not include any securities issued by Nynas AB or assets used by Nynas AB.
CHANGE OF ASSETS CEILING 2019 2018
Opening balance, assets ceiling 0.0 12.2 Interest cost/(credit) 0.0 0.0 Change in assets ceiling, other than Interest cost/(credit) 0.0 -12.8 Exchange rate (gain)/loss 0.0 0.5 CLOSING BALANCE, ASSETS CEILING 0.0 0.0
ACTUAL RETURN 2019 2018 Actual return on plan assets 186.7 -28.0
70 NYNAS ANNUAL REPORT 2019 NYNAS ANNUAL REPORT 2019 NOTES NOTES
Con’t. Note 22
SENSITIVITY ANALYSIS IMPACT OF THE BENEFIT OBLIGATION, 2017 (+Increase/-Decrease), per country
Sweden UK Belgium Germany Significant actuarial Present Sweden Present UK Present Belgium Present Germany assumptions Value % Value % Value % Value %
Discount rate, % +0,5 % 477.1 -11 1,000.7 -9 75.4 0 631.5 -13 Discount rate, % -0,5 % 604.0 13 1,200.9 10 75.4 0 847.3 16 Life expectancy +1 year 563.5 5 1,130.9 3 75.4 0 754.9 3
Sensitivity analysis have been done on above actuarial changes assumptions occures. Estimations have been done by analysing since the Group consider that the changes can have major every changes separately. If there should be any relation between impact on the benefit obligation. the assumptions, the estimations have not been taken this into Further more it is very most likely that the changes of the consideration.
Note 23. Other provisions
Provision for envrionmental Provision for obligation other obligations Total
Balance at December 31, 2018 164.6 3.6 168.2 Provisions made during the year – 0.3 0.3 Provisions used during the year -3.5 -0.2 -3.7 Translation differences 0.2 0.1 0.4 BALANCE AT DECEMBER 31, 2019 161.4 3.9 165.3 of which current 11.1 – 11.1 of which non-current 150.3 3.9 154.2
Other provisions Lagoon/Catch basins Other provisions relates mainly to the take over of the Harburg Dredging of the lagoon and catch basins started in 2017 and refinery, committed consideration but not paid and to its amount was completed in 2018. The contaminated sediments are now preliminary and subject to fulfilment of terms and conditions being dewatered. The technique for final treatment of the by the parties and future tax provision relating to Nynas foreign contaminated dewatered sediments has not yet been decided operations arising in the ordinary course of a global business. by the Land and Environment Court. Nynas will report its recommendation on the technique to be used to the court Environmental related provisions by 2020-12-31,however Nynas will request an extension of 6 Envrionmental related provisions inlcude provisions for envrion- months due to change of project manager. mental remediation measures related to the Group’s sites, mainly in Sweden (Nynäshamn), Wandre in Belgium, Köge in Denmark J3/J4 and Dundee in Scotland. The J3 and J4 areas contain acid tar. Similar materials are also The provision in Nynäshamn consists of three parts – the Land found at a number of old refineries in Europe and around the Farm (SEK 16 million), E2 (SEK 13 million) and J3/J4 (SEK 194 mil- world. They are difficult to deal with due to their high acid con- lion), the amounts being the nominal values not present values. tent. The established method involves collection, neutralization and transportation for disposal. The method is not problem-free, The Land Farm as, even after processing, the materials are unlikely to be released Remediation of the Land Farm area was completed at December from regulatory control. Nynas will report its recommendation 31, 2010. Final covering of the permanent land fill is dependent on the technique to be used for remediation of J3/J4 to the Land on subsidence in the area but is expected to be completed by and Environment Court by December 31, 2020 however Nynas 2021. will request an extension of 6 months due to change of project The remaining cost for covering the land fill has been esti- manager. The remaining cost has been estimated at 194 MSEK. mated at 16 MSEK.
71 NYNAS ANNUAL REPORT 2019 NOTES
Con’t. Note 23
E2 Court and coordination with Turnaround activities, which occur E2 is a well-defined area with contaminated sediments on the every four years, and is therefore planned for 2027. As the County seabed outside the refinery. The Land and Environment Court Administrative Board has decided that a full environmental review has decided that no physical remediation is to be done on the is required for the capping, it will be impossible to have a permit deeper parts of E2 and that the shallower parts are to be capped. for the capping ready for the turnaround in 2023. Capping requires another decision by the Land and Environment The remaining cost has been estimated at 13 MSEK.
Note 24. Liabilities to credit institutions
In April 2016, a five-year syndicated multi-currency revolving stand-still agreement. On December 12, 2019 the lenders elected credit facility of EUR 650 million was signed. not to extend the loan and Nynas AB subsequently filed for In June 2018 Nynas redeemed the unsecured four year corporate reorganization the on December 13. bond of 1,100 million SEK launched in 2014 and the shareholders In May 2020, the Company has agreed with the lenders to each provided a three-year shareholder loan of EUR 55 million. extend the maturity of the syndicated loan until June 30, 2021. In the end of 2019 the syndicated loan was provided under a
LONG-TERM LIABILITIES 2019 2018
Shareholder loan – 1,137.1 Loans from credit institutions – 5,430.6 Non-current lease liability 1,047.9 TOTAL 1,047.9 6,567.7
CURRENT LIABILITIES Shareholder loan 1,230.5 – Loans from credit institutions 5,137.6 256.4 Overdraft facilities – 44.5 Current lease liability 300.9 – TOTAL 6,668.9 300.9 GRAND TOTAL 6,668.9 6,868.6
Nominal Recognised 2019 amount amounts CURRENT LIABILITIES Description (local in SEK Year issued/maturity of loan Interest, % Currency currency) million
Variable-rate loans 2019/2020 Shareholder loan 6.00 EUR 58.9 615.2 2019/2020 Shareholder loan 6.00 EUR 58.9 615.2 2019/2020 Stand-by credit line (€ 650) 4.50 EUR 491.8 5,137.6 TOTAL 6,368,0
Nominal Recognised 2018 amount Amounts LONG-TERM LIABILITIES Description (local in SEK Year issued/maturity of loan Interest, % Currency currency) million
Variable-rate loans 2019/2021 Shareholder loan 6.00 EUR 55.4 568.5 2019/2021 Shareholder loan 6.00 EUR 55.4 568.6 2016/2021 Stand-by credit line (€ 650) 4.50 EUR 120.0 1,218.1 2016/2021 Stand-by credit line (€ 650) 4.50 EUR 80.0 812.1 2016/2021 Stand-by credit line (€ 650) 4.50 EUR 110.0 1,116.6 2016/2021 Stand-by credit line (€ 650) 4.50 EUR 80.0 812.1 2016/2021 Stand-by credit line (€ 650) 4.50 EUR 45.0 456.8 2016/2021 Stand-by credit line (€ 650) 4.50 EUR 20.0 203.0 2016/2021 Stand-by credit line (€ 650) 4.50 EUR 75.0 761.3 2016/2021 Stand-by credit line (€ 650) 4.50 EUR 5.0 50.6 TOTAL 6,567.7
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Con’t. Note 24
Nominal Recognised 2018 amount amounts CURRENT LIABILITIES Description (local in SEK Year issued/maturity of loan Interest, % Currency currency) million
Variable-rate loans 2016/2018 Stand-by credit line (€ 650) 4.5 EUR 20.0 256.4 2016/2017 Overdraft 44.5 TOTAL 300.9
MATURITY OF EXTERNAL INTEREST-BEARING LIABILITIES AT 31 DEC 2019
2020-12-31 6,368.0 2021 and thereafter – TOTAL 6,368.0
MATURITY OF EXTERNAL INTEREST-BEARING LIABILITIES AT 31 DEC 2018
2020-12-31 300.9 2020 and thereafter 6,567.7 TOTAL 6,868.6
THE GROUP HAS THE FOLLOWING UNUSED CREDIT FACILITIES: 2019 2018
Variable interest Uncommitted – 104.7 Committed expires within one year – 89.6 expires after one year – 717.8 TOTAL – 912.1
Note 25. Accrued liabilities and deferred income
2019 2018
Purchases of raw materials, semi-finished and finished goods 1,741.7 788.9 Accrued salaries/holiday pay 127.7 134.8 Accrued interest 192.0 42.2 Shipping costs 54.4 51.7 Accrued investment costs 9.3 1.1 Accrued maintenance costs 0.1 3.3 Customer provision 43.2 42.3 Accrude energy costs 27.5 16.8 Other 142.3 134.0 TOTAL 2,338.2 1,215.0
73 NYNAS ANNUAL REPORT 2019 NOTES
Note 26. Financial assets and liabilities
Financial assets and liabilities in the statement of financial posi- Derivative instruments tion are measured at fair value, apart from loans and receivables The fair value of foreign exchange contracts and oil contracts and other financial liabilities not designated as hedged items. is measured on the basis of quoted prices where available. If Loans and receivables and other financial liabilities not desig- quoted prices are not available, the fair value is measured by nated as hedged items, are measured at amortised cost. discounting the difference between the contracted forward rate Fair value disclosures are not required when the carrying and the forward rate that can be subscribed for on the reporting amount is an acceptable approximation of the fair value. This date for the remaining contract period. This is done using the applies to other items in the categories loans and receivables and risk-free rate of interest based on government bonds. other financial liabilities. The fair value of interest rate swaps is measured by discount- The Group’s long-term credit liabilities carry variable interest ing the estimated future cash flows according to the contract’s rates. Accordingly, the fair value corresponds to the carrying conditions and due dates based on the market rate. amount. Interest-bearing liabilities Fair value measurement The fair value is measured by discounting future cash flows of Fair value is determined based on a three-level hierarchy. principal and interest using the current market interest rate for Level 1 is based on quoted prices in active markets for identi- the remaining term. cal assets or liabilities. Level 2 is based on inputs other than quoted prices included in Current receivables and liabilities level 1 that are observable for the asset or liability, either directly For current receivables and liabilities with a remaining term or indirectly. of less than 12 months, the carrying amount is considered to Level 3 is based on inputs for the asset or liability that are not represent a reasonable approximation of the fair value. Current based on observable market data. receivables and liabilities with a term of more than 12 months are For Nynas, all financial instruments are measured according to discounted when the fair value is measured. Level 2. The fair values and carrying amounts of financial assets and liabilities are shown in the table: Measurement of fair value Listed holdings The fair value of instruments quoted in an active market is meas- ured on the basis of the price of the holdings at the reporting date.
Derivatives held at Financial Financial Derivatives fair value assets liabilities Non- used in through valued to valued to Total financial Total hedge income amortised amortised carrying assets and balance Fair 2019 accounting statement cost cost amount liabilities sheet value
Accounts receivable – – 1,502.0 – 1,502.0 – 1,502.0 1,502.0 Long-term dervivatives – 1.1 – – 1.1 – 1.1 1.1 Short-term derivatives – 0.4 – – 0.4 – 0.4 0.4 Other current receivables – – – 0.0 487.3 487.3 487.3 Prepaid expenses and accrued income – – – – 0.0 361.1 361.1 361.1 Cash and cash equivalents – – 1,696.0 – 1,696.0 – 1,696.0 1,696.0 FINANCIAL ASSETS 0.0 1.5 3,198.0 0.0 3,199.5 848.4 4,047.9 4,047.9
Long-term interest bearing liabilities – – – 1,047.9 1,047.9 – 1,047.9 1,047.9 Short-term interest bearing liabilities – – – 6,668.9 6,668.9 – 6,668.9 6,668.9 Accounts payable – – – 2,507.6 2,507.6 – 2,507.6 2,507.6 Joint venture liabilities – – – 10.3 10.3 – 10.3 10.3 Other current liabilities – – – – 0.0 225.0 225.0 225.0 Accrued liabilities and deferred income – – – 1,881.3 1,881.3 456.9 2,338.2 2,338.2 FINANCIAL LIABILITIES 0.0 0.0 0.0 12,116.0 12,116.0 681.9 12,797.9 12,797.9
74 NYNAS ANNUAL REPORT 2019 NYNAS ANNUAL REPORT 2019 NOTES NOTES
Con’t. Note 26
Derivatives held at Financial Financial Derivatives fair value assets liabilities Non- used in through valued to valued to Total financial Total hedge income amortised amortised carrying assets and balance Fair 2018 accounting statement cost cost amount liabilities sheet value
Accounts receivable – – 1,323.8 – 1,323.8 – 1,323.8 1,323.8 Long-term dervivatives – 1.9 – – 1.9 – 1.9 1.9 Short-term derivatives 520.9 29.1 – – 550.0 – 550.0 550.0 Other current receivables – – – 0.0 450.0 450.0 450.0 Prepaid expenses and accrued income – – – – 0.0 156.8 156.8 156.8 Cash and cash equivalents – – 844.5 – 844.5 - 844.5 844.5 FINANCIAL ASSETS 520.9 31.0 2,168.3 0.0 2,720.2 606.8 3,327.0 3,327.0
Long-term liabilities to credit institutions – – – 6,567.7 6,567.7 – 6,567.7 6,567.7 Short-term liabilities to credit institutions – – – 300.9 300.9 – 300.9 300.9 Accounts payable – – – 794.6 794.6 – 794.6 794.6 Joint venture liabilities – – – 11.9 11.9 – 11.9 11.9 Short-term derivatives 20.5 65.7 – – 86.2 – 86.2 86.2 Other current liabilities – – – – 0.0 550.9 550.9 550.9 Accrued liabilities and deferred income – – – 503.4 503.4 711.6 1,215.0 1,215.0 FINANCIAL LIABILITIES 20.5 65.7 0.0 8,178.5 8,264.7 1,262.5 9,527.2 9,527.2
Note 27. Financial risk management, supplementary information
LIQUIDITY AND REFINANCING RISK EXPOSURE
Liquidity and refinancing risk is the Average terms to maturity of outstanding loans, size of programme and remaining risk of difficulty in refinancing loans maturity, nominal SEK (excluding leases). maturing, and the risk that payment obligations cannot be fulfilled as a Average Recognised Programme remaining credit Consequence of insufficient funds. 2019 Currency liabilities size time (years) Shareholder Loan EUR 1,231 1,231 – Syndicated stand-by credit line EUR 5,138 5,138 – TOTAL BORROWING 6,368 6,368 –
Average Recognised Programme remaining credit 2018 Currency liabilities size time (years)
Shareholder Loan EUR 1,137 1,137 2.3 Syndicated stand-by credit line EUR 5,687 6,461 2.3 Other bank loans Miscellaneous 44 – – TOTAL BORROWING 6,869 7,598 2.3
75 NYNAS ANNUAL REPORT 2019 NOTES
Con’t. Note 27
COMMENT
At the turn of the year approximately 49 per cent (approx. 48) a bank syndicate of 6 banks, to exempt non-recurring sanctions of the Group’s assets were financed with external loans. To impact when calculating covenants for Q4, 2018. The banks reduce financing risk, most of Nynas’ known credit requirement did not respond to this request, instead a waiver was given in was covered by credit facilities and a shareholder loan. Depend- April 2019 for testing interest coverage for Q4, 2018. A second ence on individual financing sources is actively reduced and a request to banks was submitted concerning Q1 2019 covenants, conservative approach on counter parties for placement of any approved by the lenders March 29, 2019, subject to a request surplus liquidity is applied. For more information see the Board of for extensive financial reporting. In addition, lenders requested a Directors’ report, page 8. confirmation of working capital support to Nynas by the share- In June 2018 Nynas redeemed the unsecured four-year cor- holders, but no capital support was confirmed. porate bond of SEK 1,100 million and at the same time Nynas´ Towards the end of 2019 the Syndicated Loan was provided shareholders each provided a three-year shareholder loan of EUR under a stand-still agreement. On December 12 the lenders 55 million. elected not to extend the loan and Nynas AB subsequently filed Nynas submitted in December 2018 a request to its lenders, for reorganization the on December 13.
CURRENCY RISK
Currency risk concerns the fluctuations in exchange rates that, in • Other comprehensive income is affected when subsidiaries’ net different ways, affect the result for the year, other comprehensive assets denominated in different currencies are converted to income, and the company’s competitiveness: Swedish kronor (conversion risk).
• The result for the year is affected when sales and purchases are Nynas handles the currency risks occurring in accordance with denominated in different currencies (transaction risk). the descriptions given in the following sections. Due to limited • The result for the year is affected when assets and liabilities are availability of credit facilities, the currency risk has been hedged denominated in different currencies (conversion risk). with futures contracts to lesser extent than previous years. • The result for the year is affected when subsidiaries’ results On December 31, 2019 Nynas AB had no outstanding currency denominated in different currencies are converted to Swedish futures contracts. kronor (conversion risk).
CURRENCY RISK TRANSACTION RISK EXPOSURE
Nynas’ transaction exposure, i.e. the Group’s net AUD DKK EUR GBP NOK PLN USD OTHER currency flows, amounted to SEK -2 319 million in 2,000 2018 (-601). 1,000 0 1,000 2,000 3,000
,000 5,000 6,000 2019 2018
COMMENT, TRANSACTION RISK
Nynas has significant foreign currency payments, primarily in exchange rates. It is in the nature of the oil industry that changes USD, EUR and NOK. For example, the Group buys crude oil in in exchange rates are passed on in the prices charged to custom- EUR and sells products primarily in EUR but also in SEK and in ers. This reduces the currency risk, albeit with a certain time lag. other local currencies, and is thereby exposed to fluctuations in This also applies to Nynas.
76 NYNAS ANNUAL REPORT 2019 NYNAS ANNUAL REPORT 2019 NOTES NOTES
Cont. Note 27
CURRENCY RISK CONVERSION RISK EXPOSURE
The equity of Nynas’ foreign subsidiaries must not normally Net assets in foreign currency, SEK million. entail any significant conversion risk as the objective is NET ASSETS IN FOREIGN CURRENCY 2019 2018 to balance the subsidiary’s assets and liabilities in foreign currencies. The result of a foreign subsidiary is converted GBP 847 909 to Swedish kronor on the basis of the average exchange CHF 3 3 rate for the period in which the result was achieved, which USD 161 155 means that the Group’s result is exposed to conversion risk. SGD 285 268 The net assets, i.e. usually the subsidiary’s own capital, BRL 19 47 are converted to Swedish kronor at the exchange rate on the PLN 23 14 balance sheet date. DKK 8 5 On December 31 the Group’s net assets in subsidiaries NOK 84 123 denominated in foreign currency totalled SEK 46 million EUR 2,398 2,404 (SEK 3,250 million). Övriga -3,728 -678 TOTAL 46 3,250
The Group’s borrowing by currency * 8,000 6,868 7,000 6,368 6,000 5,000 ,000 3,000 2,000 1,000 0 0 0 0 0 SEK USD EUR 2019 *) excluding lease liabilities 2018
COMMENT, CONVERSION RISK
In order to avoid conversion risk in the subsidiaries’ balance respects to hedge net assets in foreign subsidiaries, excluding the sheets they are financed in the local currency via the internal tax effect. Forward foreign exchange contracts and equity loans bank. The currency risk incurred by the internal bank as a conse- are predominantly used to hedge net assets. Any impairment is quence is handled with the help of various derivatives, in order recognised in the result of the year. to minimise the conversion risk. Nynas’ policy is in significant
CURRENCY RISK CURRENCY SENSITIVITY EXPOSURE
In order to gain the full picture of how currency fluctuations The most obvious exposure is in the inventory. The value of the affect the Group’s operating result, consideration should specific inventory varies with the dollar price and in 2019 the be taken to both the transaction risk and the subsidiaries’ inventory value on average was approximately SEK 4,902 million operating results in the respective currencies, and the actual (4,541), with the main part in Nynas AB. A currency fluctuation in hedging. The Group’s other comprehensive income has a the SEK/USD rate by SEK 0.10 would therefore affect the result currency exposure that relates to the size of the net assets. by approximately +/- SEK 49 million. In addition to the net assets, other comprehensive income is affected by currency risk since certain derivative contracts are subject to hedge accounting, which entails that the changes in the market value of these contracts are carried directly to other comprehensive income, instead of to the result for the year.
77 NYNAS ANNUAL REPORT 2019 NOTES
Cont. Note 27
COMMENT, CURRENCY SENSITIVITY
Defined currency exposure can be hedged with currency futures On December 31, 2019 Nynas AB had no outstanding currency contracts. Due to limited availability of credit facilities, the cur- futures contracts. rency risk has been hedged to lesser extent than previous years.
INTEREST RATE RISK EXPOSURE
Interest rate risk is the risk At the close of the financial year varying rate borrowing totalled SEK 6,486 million (6,868) including that changes in market lease liability. A 1 per cent change in interest rates would therefore change the pre-tax profit/loss by interest rates that will +/- SEK 65 million (69). adversely affect the Group’s net interest income. How Fixed interest rate quickly an interest rate and fixed interest Excluding effects Including effects change affects net interest periods, SEK million. of derivatives of derivatives depends on the liabilities’ fixed interest period. Nynas Effective Fixed inter- Effective Fixed inter- measures the interest rate interest est period, interest est period, Recognised risk as the change in the next 2019 rate, % month rate, % month liabilities 12 months on a 1 per cent Shareholder Loan 6.1 16 6.1 16 1,231 change in interest rates. Syndicated stand-by credit line 5.5 1 5.5 1 5,138 Other bank loans – – – – – Interest rate swaps – 1 – 1 – TOTAL BORROWING 5.6 4 5.6 4 6,369
2018 Shareholder Loan 6.1 28 6.1 28 1,137 Syndicated stand-by credit line 4.6 2 4.6 2 5,687 Other bank loans 4.6 1 4.6 1 44 Interest rate swaps – – 0.4 18 – TOTAL BORROWING 4.8 6 5.0 14 6,868
COMMENT, INTEREST RATE RISK
The Group’s interest rate risk arises mainly from borrowing. link between hedged loans and interest rate swaps. Changes Nynas’ policy is that average fixed interest period for the Group’s in market interest rates can therefore also affect other compre- debt portfolio should be between 6 and 36 months Interest hensive income. Loans in foreign currency can be hedged with rate swap agreements can be used to achieve the targeted fixed currency interest rate swaps, which are classified as cash flow interest periods. As the table shows, the average fixed interest hedges. The derivatives that are cash flow hedges are subject to period for Nynas’ borrowing was 4 months (14) at the close of terms that match those of the loans, so that the cash flow effects the financial year, taking due account of the derivatives used. of the loans and derivatives occur in the same period and cancel The Group’s average interest rate, including other loans and the each other out. Changes in the fair value of cash flow hedges are effects of interest rate swap agreements, was 5.6 per cent (5.0 recognised directly in other comprehensive income. Any impair- 2018). Hedge accounting is applied when there is an effective ment is recognised in the result for the year.
CREDIT RISK EXPOSURE
The Group’s commercial and financial transactions SEK MILLION 2019 2018 entail credit risks in relation to Nynas’ counterparties. Accounts Receivable 1,502.0 1,323.8 Credit risk or counterparty risk is the risk of losses if the Cash and cash equivalents 1,696.0 844.5 counterparty defaults on its obligations. Non-realised gains and losses The credit risk to which Nynas is exposed can be on derivatives 1.5 463.8 divided into two categories: TOTAL 3,199.5 2,632.1 • Financial credit risk • Credit risk in accounts receivable
78 NYNAS ANNUAL REPORT 2019 NYNAS ANNUAL REPORT 2019 NOTES NOTES
Con’t. Note 27
COMMENT, CREDIT RISK
With regard to the financial credit risk, Nynas has concluded an standing accounts receivable. This risk is reduced with the help agreement with the Company’s most important banks concern- of credit insurance. The terms of the credit insurance require ing, among other things, the right to set off assets and liabilities well-established routines to determine credit limits, follow-up arising as a consequence of financial transactions, called an ISDA and reporting of late payments. There are established internal agreement. This entails that the Company’s counterparty expo- routines to determine limits that are not granted by the insur- sure to the financial sector is limited to the non-realised positive ance company. No deliveries take place before a limit has been and negative result occurring in derivative contracts. At the close approved. On average, approximately 75 per cent of outstanding of the financial year the current net value of these contracts accounts receivable are covered by credit insurance. Historically, totalled SEK 2 million (462) and approximatly 0 per cent (80) of losses on accounts receivable have, on an overall basis, been the outstanding value was secured through margin call since low. The total gross value of outstanding accounts receivable allmost all open derivatives at the end of the year was closed due as of December 31 was SEK 1,660 million (1,324). These were to the reorganisation. written down by a total of SEK -158 million (-15). Age analyses of Via its ongoing sales Nynas is exposed to credit risk in out- accounts receivable as of December 31 are presented in Note 18.
COMMODITY PRICE RISK EXPOSURE
Nynas’ financial risks on commodi- The Group purchases crude oil at current market price. It is in the nature of the oil industry ties are mainly crude oil price, fixed that changes in world market prices for oil are passed on in the prices charged to custom- price agreements and electricity. The ers, which reduces the oil price risk, albeit with a certain time lag. This also applies to price risk on this is normally to an Nynas. extent hedged by taking out financial contracts. Average terms to maturity of outstanding loans, size of programme and remaining The oil price fluctuated during the maturity, nominal SEK (excluding leases). year from an initial month-average Brent price of USD 60/bbl, to a high of Inventory volume, Inventory value, SEK USD 71/bbl in April and USD 67/ bbl at ktonnes per month million per month year-end. 2019 2018 2019 2018
January 1,165 989 5,334 3,929 February 1,182 1,000 5,392 4,075 March 1,174 1,146 5,399 4,551 April 1,166 1,107 5,428 4,536 May 1,090 1,037 5,225 4,546 June 1,104 974 5,182 4,490 July 948 1,021 4,687 4,838 August 896 972 4,414 4,849 September 1,038 918 4,831 4,757 October 900 804 4,298 4,395 November 908 851 4,237 4,526 December 912 1,043 4,396 5,004 AVERAGE 1,040 989 4,902 4,541
COMMENT, COMMODITY PRICE RISK
Inventory of oil products totalled 912 ktonnes at the close of and 0 ktonnes (0) were not classified as hedge accounting, with the financial year (1,043 ktonnes). A USD 20 tonne price change a total mark-to-market valuation of SEK 0 million (500). Nynas would thus affect the profit/loss by approximately +/- SEK 193 also concludes fixed price contracts with customers. These fixed million. Nynas’ risk policy stipulates that a large proportion of the price contracts are hedged with oil price swaps and are classified inventory should be hedged with financial contracts. Due to limi- as hedge accounting. tations of available credit lines, the oil price risk has been hedged At year-end the fixed price hedging totalled 0 ktonnes (118) to a lesser extent than previous years. On December 31, 2019 and the mark-to market valuation of the derivative contracts was Nynas AB had no outstanding oil forwards contracts. At the end SEK 0 million (-19). of the year 0 ktonnes (469) were classified as hedge accounting
79 NYNAS ANNUAL REPORT 2019 NOTES
Note 28. Derivatives and hedging
The table below show the fair value of all outstanding derivatives grouped by their treatment in the financial statement: 2019 2018 DERIVATIVES AND HEDGING Assets Liabilities Assets Liabilities
Cash flow hedges Currency forwards – – 4.0 – Oil price forward – – 499.7 19.1 TOTAL – – 503.7 19.1
Hedging of net investments Currency forwards – – 17.3 1.4 TOTAL – – 17.3 1.4
Other derivatives - changes in fair value recognised in income statement Interest rate swaps, finance net 1.5 – 1.9 0.7 Currency forwards, currency swaps finance net – – 12.2 65.0 Oil price swaps, costs of goods sold – – 16.8 – TOTAL 1.5 – 30.9 65.7
TOTAL DERIVATIVES 1.5 – 551.9 86.2
CALCULATION OF FAIR VALUE CHANGE IN HEDGING RESERVES 2019 2018 Oil and currency forwards and interest rate swaps are measured Opening hedging reserve 419.2 -243.8 at fair value based on observed forward prices for contracts with before tax equivalent maturities at the balance sheet date. Change in value during the year, -4.0 -1.3 currency swap CASH FLOW HEDGES Change in value during the year, -480.6 719.5 For the hedges of highly probable forecast sales and purchases, oil forwards as the critical terms (i.e. the notional amount, life and underly- Realised oil hedge parked in equity -27.7 -55.2 ing) of the forward foreign exchange and oil contracts and their Closing hedging reserves -93.1 419.2 corresponding hedged items are the same, Nynas performs a before tax qualitative assessment of effectiveness and it is expected that the Deferred tax, hedging reserves – -101.5 value of the forward contracts and the value of the correspond- Closing hedging reserves after tax -93.1 317.6 ing hedged items will systematically change in opposite direction in response to movements in the underlying oil price and exchange Accumulated hedging gains and losses from cash flow hedges rates. Nynas applies hedge accounting to derivatives instruments which were recognised in the hedging reserve as at December used in the risk management activities relating to oil and currency 2018 and are expected to be recovered in the income statement price risk, see further note 27. (before tax) are SEK 424.1 million for 2019 and SEK -4.9 million All derivatives are classified as hedging instruments in cash flow after 2020. hedges accounted for at fair value in the balance sheet. Changes in fair value are initially recognised in the hedging reserve in equi- ty and reversed to the income statement when the hedged cash flows are recognised in the income statement. SEK 19.5 (-29.5) million has been recognised in the income statement as a result of ineffective hedging and terminated hedge relationship in 2019. The main source of hedge ineffectiveness in these hedging relationships is the effect of the timing of purchase of inventory, which is not reflected in the fair value of the hedged item attrib- utable to changes in oil price and foreign exchange rates. No other sources of in effectiveness emerged from these hedging relationships. All expected cash flows that were hedged in 2019 still qualify for hedge accounting.
80 NYNAS ANNUAL REPORT 2019 NYNAS ANNUAL REPORT 2019 NOTES NOTES
Note 29. Pledged assets and contingencies
2019 2018 Guarantees 50.7 673.6 Other guarantees and contingent liabilities 4.1 3.8 TOTAL 54.8 677.4
A future closure of operations within the Group may involve a Transformer claim, Dominican Republic requirement for decontamination and restoration works. How- AES Andrés B.V. claimed damages from Nynas companies and ever, this is considered to be well into the future and the future others in the amount of 24.9 MUSD and Seguros Universal expenses cannot be calculated reliably. S.A. claimed damages from Nynas companies and others in the amount of 11.9 MUSD, both relating to the failure of a trans- Legal Proceedings former in December 2008. The lawsuit has been pending since Overview Februar y 2011. Nynas conducts domestic and international operations and is In December 2015 the court of first instance in the Dominican occasionally involved in disputes and legal proceedings arising Republic ruled on the merits in favour of Nynas and others. The in the course of these operations. These disputes and legal pro- decision was appealed to the Court of Appeal who rendered a ceedings are not expected to have significant negative impact on decision on May 5, 2017 affirming the trial court’s decision in Nynas’ operating profits or financial position. Nynas’ favour. The decision of the court of Appeal was appealed to the Supreme Court by the plaintiffs and has been pending for Disputes over two years. Tax dispute Nynas UK AB There is limited economical effect on Nynas as the claim is Nynas UK AB received a decision from the Swedish Tax Authority covered by insurance. December 1, 2014 that pensions payments made to Nynas UK Pension Scheme during financial year 2008 do not qualify as Shell Bitumen cartel pension cost and cannot be seen as tax deductible. In relation to the bitumen cartel in the Netherland in which The decision was appealed to the Swedish Administrative Nynas was fined in 2006, Shell was sued by a former bitumen Court, and a negative decision by the Administrative Court was customer and filed recourse actions against Nynas and others. received on March 3, 2016. Settlement has been reached by all parties involved. Nynas appealed the negative decision by the Administrative Court to the Administrative Court of Appeal on April 8, 2016. Bitumen cartel, Netherlands Nynas received a negative verdict also from the Administrative In May 2019 Nynas received a claim from the Dutch State holding Court of Appeal, decision received on December 20, 2017. Nynas jointly and severally liable for damages the Dutch State Nynas appealed the negative decision by the Administrative alleges to have suffered in relation to the bitumen cartel in which Court of Appeal to the Supreme Administrative Court and was Nynas was fined in 2006, in the amount of EUR 25 036 869 plus granted leave to appeal on June 20, 2018. Supreme Administra- statutory interest accrued totaling EUR 62 352 057. Nynas has tive Court ruled in favour of Nynas UK AB in the end of 2019, responded it contests liability for any damages alleged by the safeguarding of pension commitment by a UK Trust should not Dutch State. disqualify for treating the pension cost as deductible, therefore the tax provision of 25 MSEK was dissolved during 2019.
Tax disputes, Brazil Nynas is involved in tax disputes in Brazil relating to IPI (excise tax) and ICMS (state sales tax). The different disputes have been appealed to relevant administrative levels. Nynas assessment is that Nynas will be successful in the outcome of the tax disputes, and has therefore made no provision.
81 NYNAS ANNUAL REPORT 2019 NOTES
Note 30. Related party disclosures
Information on remuneration of the Board and key management contractual party to Nynas but has been acting trade agent on personnel can be found in note 5. behalf of a crude supplier. Petroleos de Venezuela S.A. (PdVSA) from May 6, 2020 Purchased crude during 2019 amounts to SEK 4 617 million indirectly holds approximately 14,999 per cent (previously and the outstanding principal debt to the crude supplier, as per approximately 50,001 per cent) of the shares in Nynas AB. Nynas 31 December 2019, is approximately EUR 323 million (excluding has until October 17, 2019 acquired crude deriving from oil wells accrued interest). in Venezuela, in which PdVSA has an interest. PdVSA is not a
2019 2018* Purchases, crude – – Purchases, base oils – 52.2 Sales revenue 6.5 42.1 Shareholder loan 615.2 568.6 Accounts receivable – 78.9 Accounts payable – –
* 2018 numbers have been corrected.
Neste Oyj (Neste) is the ultimate owner of 50 per cent of the Nynas sells fuel and services to Neste. All transactions are shares in Nynas AB. The Nynas Group purchases bitumen and conducted at current market prices. other oil products from Neste. 2019 2018 Purchases, bitumen 739.1 887.6 Purchases, base oils 24.6 43.6 Purchases, fuel/distillates 0.0 0.1 Purchases, leasing/services 36.8 4.1 Sales revenue 657.8 687.2 Shareholder loan 615.2 568.5 Accounts receivable 0.5 0.5 Accounts payable 7.5 45.7
Eastham Refinery Ltd (ERL) acts as a tolling unit and the own- on a contractual price. Nynas UK AB also provides administration ership of crude, bitumen and destillates remains within Nynas UK and weighbridge operation services to ERL, which are charged AB. Nynas UK AB pays a tolling fee to ERL for this service based at cost.
NYNAS UK AB 2019 2018 Purchases, leasing/services 150.3 147.6 Service revenue 3.8 3.5 Accounts receivable 0.4 0.3 Accounts payable 10.3 11.9
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Note 31. Supplementary information to the cash flow statement
2019 2018 NON CASH ITEMS Share of profit/loss of associates and joint ventures -24.2 -24.3 Dividends assoociates – 1.4 Depreciation and impairment of assets 1,856.4 657.5 IFRS 16 Leasing effect 35.6 0.0 Unrealised exchange differences and oil forward contracts 15.3 43.9 Provisions for pensions 50.4 51.2 Other provisions -4.2 -35.2 TOTAL 1,929.3 694.4
Proceeds Exchange from Amorti rate Non cash 2018 borrowings sation differences changes 2019 Long term borrowings 6,567.7 – – – - 6,567.7 – Short term borrowings 300.9 419.5 -921.6 1.5 6,567.7 6,368.0 TOTAL LIABILITIES FROM FINANCING ACTIVITIES 6,868.6 419.5 -921.6 1.5 0.0 6,368.0
Proceeds Exchange from Amorti rate Non cash 2017 borrowings sation differences changes 2018 Long term borrowings 3,829.7 2,994.4 – – -256.4 6,567.7 Short term borrowings 1,349.6 – -1,305.1 – 256.4 300.9 TOTAL LIABILITIES FROM FINANCING ACTIVITIES 5,179.3 2,994.4 -1,305.1 – – 6,868.6
Note 32. Significant events after the fiscal year
• On January 7, 2020, the Banks produced an additional resolved to prepare a second control balance sheet based unilateral set-off statement and approximately SEK 0.3 billion on going concern value and have it reviewed the Company’s standing to the credit on some of Nynas AB’s accounts held by auditor. the Banks was applied towards partial payments of the Bank’s • On May 29, 2020 a second shareholders control meeting was receivables. held that decided to continue business operations. • On January 24, 2020, the Court decided at the Creditor meet- • On June 15, 2020, the Court approved an extension of Nynas ing that the reorganization should continue according to plan company reorganisation for another three months, until until March 13, 2020. September 15, 2020. • On March 20, 2020, the Court approved an extension of • During 2020, the effects of Covid-19 have had a significant Nynas company reorganisation for another three months, until negative impact on the Company’s ongoing business opera- June 15. tions mainly related to reduced sales volumes and production • On March 31, 2020, the shareholders converted the outstand- at the ERL refinery. If the Covid-19 effects continues for a ing shareholder loan of EUR 119 million to equity. long period of time, the effects of it would continue to have a • On April 3, 2020, OFAC extended the General License GL 13E negative impact on the Group’s operations, financial position until May 14, 2020. and earnings and it may become more difficult to raise capital, • On May 12, 2020, OFAC announced that Nynas is no longer obtain loans or other financings or service existing debt. being blocked pursuant to the Venezuela Sanctions Regulations. • On May 29, 2020, Nynas AB booked impairment losses in the As a result of a corporate restructuring of the ownership of ordinary accounting as per 2020-03-31 of SEK 694 million Nynas AB sanctions are lifted, and US persons and companies related to tangible assets (based on a WACC of 9 per cent). no longer require an authorization from OFAC to engage in An impairment gain of SEK 800 million was adjusted for in the transactions or activities with Nynas AB. As a consequence, control balance sheet dated May 29, 2020 related to invest- general license GL 13E was removed. ments in subsidiaries. • On May 29, 2020, the Company has agreed with the major • On May 29, 2020, Nynas AB booked impairment losses in the creditors; the banks and the largest crude supplier to extend ordinary accounting as per 2020-03-31 of 328 MSEK due to the maturity of their receivables until June 30, 2021. significant decrease in crude oil prices compared to December • On May 29, 2020, the board of Nynas AB (the “Company”) 2019.
83 NYNAS ANNUAL REPORT 2019 NOTES
Notes to the financial statements – Parent Company
Note 33. Information by geographical market and sales revenues
SALES REVENUES BY GEOGRAPHICAL MARKET 2019 2018
Sweden 2,017.5 1,896.6 Rest of Nordics 3,349.8 3,734.3 Rest of Europe 6,904.9 6,635.9 Americas 832.2 787.0 Other 1,600.2 2,002.3 TOTAL 14,704.5 15,056.3
TOTAL ASSETS BY GEOGRAPHICAL MARKETS 2019 2018
Sweden 12,329.0 12,663.7 TOTAL 12,329.0 12,663.7
PURCHASES AND SALES GROUP COMPANIES Purchases, % 5 5 Sales, % 24 25
Note 34. Costs itemised by nature of expense
2019 2018 Raw materials 11,229.9 10,874.6 Transport and distribution costs 1,683.9 1,717.5 Manufacturing expenses 1,081.4 1,670.7 Costs for employee benefits (note 36) 460.8 477.1 Depreciation, amortisation, impairment (notes 43,44) 376.8 384.9 Other income and value changes 16.8 -42.2 Other expenses 553.1 293.6 TOTAL 15,402.7 15,376.2
During 2019 no realised gains and losses from cash flow hedges Other income and value changes consists of unrealized gain and (oil) were re-classified to raw materials in the Income statement. losses from oil and currency derivatives of -16,8 (42,2).
84 NYNAS ANNUAL REPORT 2019 NOTES
Note 35. Other operating income and expenses
2019 2018
OTHER OPERATING INCOME Exchange gains on operating receivables/liabilities 272.4 275.9 Other service revenue 14.7 13.7 TOTAL 287.1 289.7
OTHER OPERATING EXPENSES Exchange losses on operating receivables/liabilities -287.8 -272.9 TOTAL -287.8 -272.9
Note 36. Employees, personnel expenses and remuneration of senior executives
The average number of employees, with wages, salaries, other remuneration, social security contributions and pension costs, is shown in the tables below. 2019 2018
AVERAGE NUMBER OF EMPLOYEES Men Women Total Men Women Total
PARENT Sweden 327 145 472 329 138 467 TOTAL PARENT 327 145 472 329 138 467
Senior Senior WAGES, SALARIES AND SOCIAL Executives Other Executives Other SECURITY CONTRIBUTIONS (8 individuals) Employees Total (7 individuals) Employees Total
PARENT Sweden Salaries and other benefits 14.2 285.9 300.2 18.5 294.3 312.8 (of which bonuses) 0.4 6.5 6.9 3.1 6.9 10.0 Social security contributions 10.0 150.6 160.6 13.1 151.2 164.3 (of which pension costs) 5.5 51.3 56.8 6.2 47.0 53.2 TOTAL PARENT 24.3 436.5 460.8 31.6 445.5 477.1
GENDER DISTRIBUTION IN MANAGEMENT PARENT 2019 2018
Board, female rep., % 41.2 22.2 Executive Board, female rep., % 22.2 12.5
See note 5 as regards to remuniration to senior executives and CEO.
85 NYNAS ANNUAL REPORT 2019 NOTES
Note 37. Depreciation and amortisation of tangible and intangible assets
Intangible Tangible DEPRECIATION AND AMORTISATION BY FUNCTION 2019 2018 2019 2018
Cost of sales 3.2 3.2 334.2 338.3 Distribution costs 0.7 0.7 14.9 16.1 Administrative expenses 17.8 21.0 5.9 8.0 TOTAL 21.8 24.9 355.0 362.4
DEPRECIATION AND AMORTISATION BY TYPE OF ASSET 2019 2018
Computer software 21.8 24.9 Buildings 8.8 13.0 Land improvements 4.1 5.1 Plant and machinery 318.4 319.0 Equipment 23.7 25.3 TOTAL 376.8 387.3
Difference between recognised depreciation and regular depreciation: – – TOTAL RECOGNISED DEPRECIATION 376.8 387.3
Note 38. Auditors’ fees and other remuneration
AUDIT FEES 2019 2018
ERNST & YOUNG AB Annual audit 2.9 2.7 Other audit services 6.2 0.3 Tax advicory service 2.5 2.2 Other services 1.3 –
Note 39. Fees for operating leases
PAYMENTS UNDER NON-CANCELLABLE OPERATING LEASES 2019 2018
Payments during the financial year 213.6 272.6
AGREED FUTURE PAYMENTS Within one year 205.2 202.2 2 – 5 years 794.6 713.7 6 years and thereafter 228.1 397.4
At end of 2019 Nynas AB had one bitumen carrier on bareboat, The Parent Company does not have any material agreements one bitumen carrier on time charter and two special oil carriers classified as finance leases. on time charters.
86 NYNAS ANNUAL REPORT 2019 NOTES
Note 40. Net financial items
2019 2018
Interest income, bank deposit 1 20.9 2.7 Interest income, derivative instruments (actual interest rates and changes in value) 1.7 15.1 Sales and liquidation of shares in subsidaries 0.2 – Dividends from Group companies 365.8 214.5 TOTAL FINANCE INCOME 388.6 232.3
Of which total interest income attributable to items carried at amortised cost 20.9 2.7
Interest expense, loans and bank overdrafts 2 -385.9 -338.4 Interest expense, derivative instruments (actual interest rates and changes in value) -10.1 -17.5 Interest expense, interest bearing accounts payable -174.2 – Interest expense, PRI pension obligations -7.9 -7.3 Net exchange differences -222.1 -233.4 Impairment of shares in subsidiary – – Other finance costs -115.8 -77.1 TOTAL FINANCE COSTS -915.9 -673.6
Of which total interest expense attributable to items carried at amortised cost -568.0 -345.7 TOTAL NET FINANCIAL ITEMS -527.3 -441.3
1) Parent’s interest income from Group companies is 1.7 (0.8) 2) Parent’s interest expense to Group companies is -0.5 (-1.7)
Note 41. Appropriations
APPROPRIATIONS 2019 2018
Difference between recognised depreciation and regular depreciation – 0.2 Group Contribution -0.3 -0.3 TOTAL -0.3 -0.1
UNTAXED RESERVES Accumulated accelerated depreciation – 4.2 Inventory obsolescence reserve – – TOTAL 0.0 4.2
87 NYNAS ANNUAL REPORT 2019 NOTES
Note 42. Taxes
2019 2018
Current tax – – Current tax, prior years 0.1 0.2 Deferred tax -42.4 -134.2 TOTAL -42.2 -134.0
Tax on the Parent Company’s profit before tax differs from the theoretical figure that would have resulted from a weighted average rate for the results in the consolidated companies as follows: 2019 2018
Result before tax -1,226.5 -744.5 Tax according to Parent Company’s applicable tax rate 262.5 163.8 Tax effect of: Dividends from subsidiaries 78.3 47.2 Change in valuation of deferred tax assets -14.0 – Other non-deductible expenses -69.2 0.0 Other non-taxable income 23.2 14.1 Effect of future changed coporate income tax in Sweden 0.0 -14.3 Increase and change in loss carry-forwards without corresponding capitalisation of deferred tax -323.0 -345.7 Other – 0.9 Recognised tax expense -42.2 -134.0
Standard rate of income tax, % 21.4 22.0 Effective tax rate, % -3.4 -18.0
Assets Liabilities Net DEFERRED TAX ASSETS AND LIABILITIES 2019 2018 2019 2018 2019 2018 Other operating receivables/liabilities 0.0 42.1 0.3 97.6 -0.3 -55.5 Tax loss carryforwards – 14.0 – – – 14.0 TOTAL 0.0 56.1 0.3 97.6 -0.3 -41.5
Recognised Recognised CHANGE IN DEFERRED TAX ON TEMPORARY Opening in income directly in Exchange Closing DIFFERENCES DURING YEAR balance statement equity differences balance
Other operating receivables/liabilities -55.5 -28.4 83.6 – -0.3 Tax loss carryforwards 14.0 -14.0 – – – TOTAL -41.5 -42.4 83.6 – -0.3
Tax losses in the parent company are from fiscal year 2013-2019.
88 NYNAS ANNUAL REPORT 2019 NOTES
Note 43. Intangible assets
Computer Other intang. Total 2019 Goodwill software assets/trademarks intangible assets
Opening cost 14.2 468.0 1.5 483.7 Acquisitions – 10.4 – 10.4 Reclassifications – 7.3 – 7.3 CLOSING COST 14.2 485.5 1.5 501.2
Opening regular depreciation -10.9 -375.9 -1.5 -388.3 Amortisation for the year – -21.8 – -21.8 CLOSING REGULAR DEPRECIATION -10.9 -397.7 -1.5 -410.1
Opening impairment -3.3 -26.7 – -30.0 CLOSING IMPAIRMENT -3.3 -26.7 – -30.0
CLOSING RESIDUAL VALUE 0.0 61.2 0.0 61.2
Computer Other intang. Total 2018 Goodwill software assets/Trademarks intangible assets
Opening cost 14.2 447.2 1.5 462.9 Acquisitions – -0.6 – -0.6 Reclassifications – 21.5 – 21.5 CLOSING COST 14.2 468.0 1.5 483.7
Opening regular depreciation -10.9 -350.9 -1.5 -363.3 Depreciation for the year – -24.9 – -24.9 CLOSING REGULAR DEPRECIATION -10.9 -375.9 -1.5 -388.3
Opening impairment -3.3 -26.7 – -30.0 CLOSING IMPAIRMENT -3.3 -26.7 – -30.0
CLOSING RESIDUAL VALUE 0.0 65.5 0.0 65.5
89 NYNAS ANNUAL REPORT 2019 NOTES
Note 44. Tangible assets
Plant and Construction Total tangible 2019 Buildings machinery Equipment in progress assets
Opening cost 376.2 6,486.6 332.2 233.9 7,428.9 Acquisitions 0.3 336.6 0.6 122.6 460.1 Disposals – – – – – Reclassifications 2.0 120.5 2.4 -132.1 -7.3 CLOSING COST 378.4 6,943.7 335.2 224.5 7,881.8
Opening regular depreciation -175.2 - 4,277.4 -233.0 – -4,685.6 Depreciation for the year -12.9 -318.4 -23.7 – -355.0 CLOSING REGULAR DEPRECIATION -188.1 -4,595.7 -256.7 – -5,040.6
CLOSING RESIDUAL VALUE 190.3 2,348.0 78.4 224.5 2,841.2
Opening impairment 0.0 -24.9 0.0 -13.3 -38.2 CLOSING IMPAIRMENT 0.0 -24.9 0.0 -13.3 -38.2 CLOSING RESIDUAL VALUE 190.3 2,323.1 78,424 211.2 2,802.9 Of which carrying amount, Sweden 190.3
Plant and Construction Total tangible 2018 Buildings machinery Equipment in progress assets
Opening cost 371.9 6,274.5 310.8 247.1 7,204.4 Acquisitions 1.9 36.6 7.9 202.1 248.4 Disposals – – -0.1 – -0.1 Reclassifications 2.4 175.5 13.5 -215.3 -23.9 CLOSING COST 376.2 6,486.6 332.2 233.9 7,428.9
Opening regular depreciation -156.9 -3,959.4 -209.3 – -4,325.7 Disposals – – 0.1 – 0.1 Depreciation for the year -18.3 -318.0 -23.8 – -360.0 CLOSING REGULAR DEPRECIATION -175.2 -4,277.4 -233.0 0.0 -4,685.6
CLOSING RESIDUAL VALUE 201.0 2,209.2 99.1 233.9 2,743.3
Opening impairment – -24.9 – -13.3 -38.2 CLOSING IMPAIRMENT – -24.9 – -13.3 -38.2 CLOSING RESIDUAL VALUE 201.0 2,184.3 99.1 220.6 2,705.0 Of which carrying amount, Sweden 201.0
Accumulated accelerated depreciation is accounted for under untaxed reserves in the Parent Company.
Note 45. Shares in group companies
2019 2018 Opening cost 2,876.9 2,876.9 Contribution in cash – – Liquidation -0.3 – Impairment of shares in subsidary – – CLOSING COST 2,876.6 2,876.9
List of Group Companies, see note 14.
90 NYNAS ANNUAL REPORT 2019 NOTES
Note 46. Inventories
2019 2018
Raw materials 1,093.2 1,462.4 Semi-finished products 525.7 517.9 Finished products 1,914.7 2,064.1 TOTAL 3,533.6 4,044.4
Amounts relating to impairment losses on inventories are report- Impairment of inventory value per end of 2019 have been done, ed under costs of goods sold and are SEK 0 (0) million. no need for write down exists. Inventories are stated at the lower of cost and net realisable value, with due consideration of obsolenscence.
Note 47. Accounts receivable
2019 2018 Loss Net carrying Loss Net carrying Gross allowance amount Gross allowance amount
Current receivables 536.1 -0.3 535.8 455.5 -0.2 455.2 Past due 1–30 days 138.7 -9.5 129.1 136.6 -0.2 136.4 Past due 31–90 days 95.6 -39.0 56.6 31.3 -0.1 31.1 Past due 91–180 days 9.6 -1.4 8.2 44.9 -2.4 42.6 Past due 181–360 days 18.0 -12.7 5.2 45.4 -0.6 44.7 Past due over 360 days 66.6 -68.3 -1.7 4.1 -3.5 0.6 Bankrupcy – -3.0 -3.0 – – – TOTAL ACCOUNTS RECEIVABLES 864.5 -134.3 730.2 717.7 -7.0 710.7
Performance obligation The average credit period on sales of goods is 30,5 days. No inter- Revenue is recognized when control passes to the customer. A est is charged on outstanding trade receivables. Nynas always customer obtains control when they have the ability to direct the measure the loss allowance for trade receivables at an amount use of the asset (goods / products) and to obtain substantially equal to lifetime ECL. The Group writes off a trade receivable all of the benefits embodied in the same. In most cases this will when there is information indicating that the debtor is in severe be the same point in time as when risks and rewards passes financial difficulty and there is no realistic prospect of recovery, and therefore there will be no change in the timing of revenue e.g. when the debtor has been placed under liquidation or has recognition. entered into bankruptcy proceedings, or when the trade receiva- bles are over 365 days past due, whichever occurs earlier. Factoring Accounts receivable not covered by insurance amounts to 24 The Group have applied factoring for a limited part of the invoic- % during end of 2019 (23 %). Since approx. 75 % of all sales ing. At year-end 2019, the part used as Factoring is approximate- in the group during the year is covered by the credit insurance ly 14 percent and has been accounted for as off balance sheet. Nynas AB will only determine an expected credit loss model on sales that is uninsured. Loss allowance Nynas has moved from an incurred loss model to an expected loss model with an earlier recognition of impairment. Nynas applies the simplified approach for trade receivables. The expected credit losses on trade receivables are estimated using a provision matrix by reference to past default experience of the debtor and an analysis of the debtor’s current financial position, adjusted for factors that are specific to the debtors, general economic conditions of the industry in which the debtors operate and an assessment of both the current as well as the forecast direction of conditions at the reporting date.
91 NYNAS ANNUAL REPORT 2019 NOTES
Note 48. Prepayments and accrued income
2019 2018
Rent 4.8 2.3 Charter hire 37.2 38.7 Pension premiums 5.1 5.1 Software licences 12.3 9.3 Prepayment crude purchase 171.7 – Other prepayments 50.2 26.0 TOTAL 281.3 81.3
Note 49. Cash and cash equivalents
2019 2018
Cash and bank balances 731.5 463.7 Restricted cash – – CASH AND CASH EQUIVALENTS RECOGNISED 731.5 463.7
The Parent Company’s cash & cash equivalents comprise its deposits in the Group’s common bank accounts and its own bank accounts.
Note 50. Equity
DISTRIBUTION OF SHARE CAPITAL 2019 2018
CHANGE IN TOTAL NUMBER OF SHARES Opening number 67,532 67,532 Change during the year 0 0 CLOSING NUMBER 67,532 67,532
2019 2018 Number of Number of CLASS OF SHARE shares % shares % Class A 33,765 50 33,765 50 Class B 33,767 50 33,767 50 TOTAL 67,532 100 67,532 100
Restricted reserves Proposed distribution of profit Restricted reserves may not be reduced by distribution of dividends. The Board proposes that the available profits of SEK 191,634,137 in the Parent Company be distributed as follows: Unrestricted equity Retained earnings comprises the previous year’s unrestricted Total dividend 0 equity after transfers to the statutory reserve and dividend Carried forward 191,634,137 payments. Retained earnings, net profit for the year and the fair SEK 191,634,137 value reserve (if applicable) constitute total unrestricted equity, in other words the amount available for distribution to shareholders. For more information see page 38, Corporate Governance.
92 NYNAS ANNUAL REPORT 2019 NOTES
Note 51. Provisions for pensions
The Parent Company’s employees, former employees and their information cannot be obtained to calculate the Parent Company’s survivors may be covered by defined contribution and defined share in this plan, and the plan has been reported as a defined benefit plans relating to post-employment benefits. The defined contribution plan. In the Parent Company’s case, this relates to the benefit plans cover retirement pension, survivor’s pension and ITP pension plan which is administered via Collectum. However, the healthcare. majority of the Swedish plan for salaried employees (ITP) is funded The obligation reported in the balance sheet is derived from the by pension provisions, which are covered by credit insurance with defined benefit plans. The plans are covered by a re-insured provi- Försäkringsbolaget Pensionsgaranti (FPG) and managed by a Swed- sion in the balance sheet and by pension benefit plans and funds. ish multi-employer institution, Pensionsregistreringsinstitutet (PRI). The calculations are based on the projected unit credit method The Parent Company’s forecast payment of pensions in relation using the assumptions shown in the table below. to defined benefit plans, both funded and unfunded, amounts to The main differences from IAS 19 relate to determination of SEK 7.8 (7,4) million for 2019. the discount rate and the fact that the defined benefit obligation The Parent Company’s provisions for pensions mainly consist of is based on the present salary level, without taking into account ITP, and are covered via Försäkringsbolaget Pensionsgaranti (FPG) future salary increases, and that all actuarial gains and losses are or other insurance institutions. Payments have also been made recongnised immediately in profit or loss. Defined benefit pension to endowment insurance policies. The value of these insurance plans are calculated by an independent external actuary. policies at the end of the year was SEK 95.1 (92.2) million, which In the case of a multi-employer defined benefit plan, sufficient corresponds to the value of the obligations.
RECONCILIATION OF REVISED PENSION LIABILITY 2019 2018
Present value of pension obligations, wholly or partly funded – – Fair value of pension benefit plan assets – – Surplus in pension benefit plan – – Present value of obligations relating to unfunded pension plans 205.3 190.5 Unrecognised surplus in pension benefit plan – – NET LIABILITY RECOGNISED 205.3 190.5
The amount allocated to the pension provision is calculated in pension increases; instead, the calculation is based on the salary accordance with the Swedish Pension Obligations Vesting Act. or pension level on the reporting date. The discount rate accord- This method differs from the IFRS project unit credit method, ing to PRI is 4.0% (4.0%). mainly in that it does not take into account expected salary or
CHANGE IN NET DEBT 2019 2018
Net debt at beginning of year 190.5 180.7 Cost recognised in income statement 22.2 16.7 Pension payments -7.4 -6.9 NET DEBT AT END OF YEAR 205.3 190.5
Payments relating to defined benefit plans are expected to amount to SEK 7.4 million in 2019.
PENSION EXPENSE FOR THE PERIOD 2019 2018
Book reserve pensions 6.9 7.2 Interest expense (calc. discount effect) 7.9 7.3 COST OF BOOK RESERVE PENSIONS 14.8 14.5
Pensions through insurance: Insurance premiums 67.5 58.9 RECOGNISED NET COST ARISING FROM PENSIONS EXCL. TAX 82.3 73.4
Dividend tax on pension funds 0.0 0.1 Payroll tax on pension costs 15.5 15.2 PENSION EXPENSE FOR THE YEAR 97.8 88.7
Percentage return on pension benefit plan assets. % 0.0 0.0
Interest income is reported under net financial items. while other costs are reported under operating expenses.
93 NYNAS ANNUAL REPORT 2019 NOTES
Note 52. Other provisions
Provision for Provision environmental Provision for for other obligation restructuring obligations Total
Balance at December 31,2018 152.5 0.0 0.0 152.5 Provisions used during the year -2.8 0.0 0.0 -2.8 BALANCE AT DECEMBER 31, 2019 149.7 0.0 0.0 149.7 of which current 11.1 – – 11.1 of which non-current 138.6 – – 138.6
Environmental realted provisions
The provision in Nynäshamn consists of three parts – the Land Farm (SEK 16 million), E2 (SEK 13 million) and J3/J4 (SEK 194 million). See note 23 for description. All costs associated with the remediation project have been calculated using the present value method.
Note 53. Liabilities to credit institutions
In June 2018 Nynas redeemed the unsecured four-year corporate vided under a stand-still agreement. On December 12 the lenders bond of SEK 1,100 million and at the same time Nynas´ share- elected not to extend the loan and Nynas AB subsequently filed holders each provided a three-year shareholder loan of EUR 55 for reorganization the on December 13. million. Towards the end of 2019 the Syndicated Loan was pro-
2019 2018
LONG-TERM LIABILITIES Shareholder loan – 1,137.1 Loans from credit institutions – 5,430.6 TOTAL – 6,567.7
CURRENT LIABILITIES Shareholder loan 1,230.5 – Loans from credit institutions 5,137.6 256.4 TOTAL 6,368.1 256.4
GRAND TOTAL 6,368.1 6,824.1
94 NYNAS ANNUAL REPORT 2019 NOTES
Con’t. Note 53
2019 CURRENT LIABILITIES Nominal amount Amounts in SEK Year issued/maturity Description of loan Interest, % Currency (local currency) millions
Variable-rate loans 2019/2020 Shareholder loan 6.00 EUR 58.9 615.2 2019/2020 Shareholder loan 6.00 EUR 58.9 615.2 2019/2020 Stand-by credit line (€ 650) 4.50 EUR 491.8 5,137.6 TOTAL 6,368.1
2018 LONG-TERM LIABILITIES Nominal amount Recognised amounts Year issued/maturity Description of loan Interest, % Currency (local currency) in SEK million
Variable-rate loans 2019/2021 Shareholder loan 6.00 EUR 55.4 568.5 2019/2021 Shareholder loan 6.00 EUR 55.4 568.6 2016/2021 Stand-by credit line (€ 650) 4.50 EUR 120.0 1,218.1 2016/2021 Stand-by credit line (€ 650) 4.50 EUR 80.0 812.1 2016/2021 Stand-by credit line (€ 650) 4.50 EUR 110.0 1,116.6 2016/2021 Stand-by credit line (€ 650) 4.50 EUR 80.0 812.1 2016/2021 Stand-by credit line (€ 650) 4.50 EUR 45.0 456.8 2016/2021 Stand-by credit line (€ 650) 4.50 EUR 20.0 203.0 2016/2021 Stand-by credit line (€ 650) 4.50 EUR 75.0 761.3 2016/2021 Stand-by credit line (€ 650) 4.50 EUR 5.0 50.6 TOTAL 6,567.7
CURRENT LIABILITIES
Nominal amount Amounts in Year issued/maturity Description of loan Interest, % Currency (local currency) SEK million
Variable-rate loans 2016/2019 Stand-by credit line (€ 650) 4.5 EUR 25.0 256.4 TOTAL 256.4
95 NYNAS ANNUAL REPORT 2019 NOTES
Note 54. Accrued liabilities and deferred income
2019 2018
Purchases of raw materials, semi-finished and finished goods 1,736.9 784.8 Accrued salaries/holiday pay 79.8 86.7 Accrued interest 192.0 42.2 Shipping costs 42.3 45.5 Accrued investment costs 4.3 46.2 Customer provision 33.3 33.0 Accrued energy costs 11.4 0.0 Other 34.4 3.7 TOTAL 2,134.3 1,042.2
Note 55. Financial assets and liabilities
See note 26 for a description of the measurement and calculation of fair value.
Derivatives held at fair Financial Financial value assets liabilities Derivatives through valued to valued to Total Non-financial Total used in hedge income amortised amortised carrying assets and balance 2019 accounting statement cost cost amount liabilities sheet
Accounts receivable – – 730.2 – 730.2 – 730.2 Receivables from Group companies – – 1,135.2 – 1,135.2 – 1,135.2 Long-term derivatives – 1.1 – – 1.1 – 1.1 Short-term derivatives – 0.4 – – 0.4 – 0.4 Other current receivables – – – – – 161.6 161.6 Prepaid expenses and accrued income – – – – – 266.3 266.3 Cash and cash equivalents – – 731.5 – 731.5 – 731.5 FINANCIAL ASSETS – 1.5 2,596.9 – 2,598.4 427.9 3,026.3
Long-term liabilities to credit institutions – – – – 0.0 – 0.0 Short-term liabilities to credit institutions – – – 6,368.1 6,368.1 – 6,368.1 Long-term liabilities to Group companies – – – 0.2 0.2 – 0.2 Current i-b liabilities to Group companies – – – 76.1 76.1 – 76.1 Current non-i-b liabilities to Group companies – – – 539.6 539.6 – 539.6 Accounts payable – – – 2,323.2 2,323.2 – 2,323.2 Short-term derivatives – – – – – – – Other current liabilities – – – – – 132.5 132.5 Accrued liabilities and deferred income – – – 1,881.3 1,881.3 253.0 2,134.3 FINANCIAL LIABILITIES – – – 11,188.5 11,188.5 385.5 11,574.0
96 NYNAS ANNUAL REPORT 2019 NOTES
Con’t. Note 55
Derivatives held at fair Financial Financial value assets liabilities Derivatives through valued to valued to Total Non-financial Total used in hedge income amortised amortised carrying assets and balance 2018 accounting statement cost cost amount liabilities sheet
Accounts receivable – – 710.7 – 710.7 – 710.7 Receivables from Group companies – – 909.7 – 909.7 – 909.7 Long-term derivatives – 1.9 – – 1.9 – 1.9 Short-term derivatives 520.9 29.1 – – 550.0 – 550.0 Other current receivables – – – – – 176.4 176.4 Prepaid expenses and accrued income – – – – – 81.3 81.3 Cash and cash equivalents – – 463.7 – 463.7 – 463.7 FINANCIAL ASSETS 520.9 31.0 2,084.1 – 2,636.0 257.7 2,893.7
Long-term liabilities to credit institutions – – – 6,567.7 6,567.7 – 6,567.7 Short-term liabilities to credit institutions – – – 256.4 256.4 – 256.4 Long-term liabilities to Group companies – – – 0.2 0.2 – 0.2 Current i-b liabilities to Group companies – – – 808.5 808.5 – 808.5 Current non-i-b liabilities to Group companies – – – 365.7 365.7 – 365.7 Accounts payable – – – 612.4 612.4 – 612.4 Short-term derivatives 20.5 65.7 – – 86.2 – 86.2 Other current liabilities – – – – – 488.5 488.5 Accrued liabilities and deferred income – – – 503.4 503.4 538.8 1,042.2 FINANCIAL LIABILITIES 20.5 65.7 – 9,114.3 9,200.5 1,027.3 10,227.8
Note 56. Pledged assets and contingencies
2019 2018
FLOATING CHARGES Security for liabilities to credit institutions – – TOTAL – –
Securities for Group companies 16,0 124,9 Guarantees 50,7 673,1 Other guarantees and contingent liabilities 4,1 3,8 TOTAL 70,8 801,8
A future closure of operations within the Group may involve a Disputes – for information on ongoing disputes, see note 29 requirement for decontamination and restoration works. How- (financial statement for the Group). ever, this is considered to be well into the future and the future expenses cannot be calculated reliably.
97 NYNAS ANNUAL REPORT 2019 NYNAS ANNUAL REPORT 2019 NOTES ASSURANCE
Note 57. Related party disclosures
Information on remuneration of the Board and key management contractual party to Nynas but has been acting trade agent on personnel can be found in note 5. behalf of a crude supplier. Petroleos de Venezuela S.A. (PdVSA) from May 6, 2020 Purchased crude during 2019 amounts to SEK 4 617 million indirectly holds approximately 14,999 per cent (previously and the outstanding principal debt to the crude supplier, as per approximately 50,001 per cent) of the shares in Nynas AB. Nynas 31 December 2019, is approximately EUR 323 million (excluding has until October 17, 2019 acquired crude deriving from oil wells accrued interest). in Venezuela, in which PdVSA has an interest. PdVSA is not a
2019 2018*
Purchases, crude – – Purchases, base oils – 52.2 Sales revenue 6.5 42.1 Shareholder loan 615.2 568.6 Accounts receivable – 78.9 Accounts payable – –
* 2018 numbers have been corrected.
Neste Oyj (Neste) is the ultimate owner of 50 per cent of the other oil products from Neste. Nynas sells fuel and services to shares in Nynas AB. The Nynas Group purchases bitumen and Neste. All transactions are conducted at current market prices.
2019 2018
Purchases, bitumen 739.1 887.6 Purchases, base oils 24.6 43.6 Purchases, fuel/distillates – 0.1 Purchases, leasing/services 36.8 4.1 Sales revenue 657.8 687.2 Shareholder loan 615.2 568.5 Accounts receivable 0.5 0.5 Accounts payable 7.5 45.7
Note 58. Supplementary information to the cash flow statement
2019 2018
Depreciation and impairment of assets 376.8 387.3 Provisions for pensions 14.8 13.2 Other provisions -2.8 3.3 TOTAL 388.8 403.8
Proceeds from Non cash 2018 borrowings Amortisation changes 2019 Long term borrowings, credit institutions and shareholder loan 6,567.7 – – - 6,567.7 – Long term borrowings, Group companies 0.2 – – – 0.2 Short term borrowings, credit institutions 256.4 465.5 -921.6 6,567.7 6,368.0 Short term borrowings, Group companies 808.5 – -732.4 – 76.1 TOTAL LIABILITIES FROM FINANCING ACTIVITIES 7,632.8 465.5 -1,654.0 – 6,444.3
Proceeds from Non cash 2017 borrowings Amortisation changes 2018 Long term borrowings, credit institutions 3,829.7 2,994.4 – -256.4 6,567.7 Long term borrowings, Group companies 0.2 – – – 0.2 Short term borrowings, credit institutions 1,309.3 – -1,309.3 256.4 256.4 Short term borrowings, Group companies 1,034.2 – -225.7 – 808.5 TOTAL LIABILITIES FROM FINANCING ACTIVITIES 6,173.4 2,994.4 -1,535.0 – 7,632.8
98 NYNAS ANNUAL REPORT 2019 ASSURANCE
Assurance
The Annual Accounts have been prepared in accordance with generally accepted accounting principles in Sweden and that the Consoli- dated Accounts have been prepared in accordance with EU-approved International Financial Reporting Standards, IFRS. The Annual Accounts and the Consolidated Accounts give a true and fair view of the Parent Company’s and the Group’s financial position and results of operations. The Directors’ Report for the Group and the Parent Company give a true and fair overview of the Group’s and the Parent Company’s operations, position and results and describes the material risks and uncertainties faced by the Parent Company and the companies that make up the Group.
Stockholm, June , 2020
Magnus Wittbom Chairman of the Board
Jyrki Mäki-Kala Christian Ståhlberg Joachim Morath
Fredrik Lundström Sam Holmberg Oswaldo Pérez
Roland Bergvik Pia Ovrin
Bo Askvik President and CEO
Our Audit Report was submitted on June , 2020 Ernst & Young AB
Rickard Andersson Authorised Public Accountant
99 NYNAS ANNUAL REPORT 2019 AUDITOR’S REPORT
This is a translation from the Swedish original.
Auditor’s report
To the general meeting of Nynas AB (publ), corporate identity solidated accounts, our responsibility is to read the information number 556029-2509 identified above and consider whether the information is materially inconsistent with the annual accounts and consolidated accounts. In this procedure we also take into account our knowledge oth- Report on the annual accounts and consolidated accounts erwise obtained in the audit and assess whether the information Opinions otherwise appears to be materially misstated. We have audited the annual accounts and consolidated accounts of If we, based on the work performed concerning this informa- Nynas AB for the year 1 January 2019 – 31 December 2019 with the tion, conclude that there is a material misstatement of this other exception for the corporate governance statement and the statu- information, we are required to report that fact. We have nothing tory sustainability report on pages 21–26 respectively. The annual to report in this regard. accounts and consolidated accounts of the company are included on pages 8–20 and 34–99 in this document. Responsibilities of the Board of Directors and the Managing Director In our opinion, the annual accounts have been prepared in The Board of Directors and the Managing Director are responsi- accordance with the Annual Accounts Act and present fairly, in all ble for the preparation of the annual accounts and consolidated material respects, the financial position of the parent company as accounts and that they give a fair presentation in accordance with of 31 December 2019 and its financial performance and cash flow the Annual Accounts Act and, concerning the consolidated accounts, for the year then ended in accordance with the Annual Accounts in accordance with IFRS as adopted by the EU. The Board of Direc- Act. The consolidated accounts have been prepared in accordance tors and the Managing Director are also responsible for such internal with the Annual Accounts Act and present fairly, in all material control as they determine is necessary to enable the preparation of respects, the financial position of the Group as of 31 December annual accounts and consolidated accounts that are free from mate- 2018 and their financial performance and cash flow for the year rial misstatement, whether due to fraud or mistakes. then ended in accordance with International Financial Reporting In preparing the annual accounts and consolidated accounts, the Standards (IFRS), as adopted by the EU, and the Annual Accounts Board of Directors and the Managing Director are responsible for the Act. The statutory administration report is consistent with the other assessment of the company’s and the Group’s ability to continue as a parts of the annual accounts and consolidated accounts. going concern. They disclose, as applicable, matters related to going We therefore recommend that the general meeting adopts the concern and using the going concern basis of accounting. The going income statement and balance sheet for the parent company and concern basis of accounting is however not applied if the Board of the Group. Directors and the Managing Director intend to liquidate the compa- ny, to cease operations, or has no realistic alternative but to do so. Basis for Opinions We conducted our audit in accordance with International Standards Auditor’s responsibility on Auditing (ISA) and generally accepted auditing standards in Swe- Our objectives are to obtain reasonable assurance about whether the den. Our responsibilities under those standards are further described annual accounts and consolidated accounts as a whole are free from in the Auditor’s Responsibilities section. We are independent of the material misstatement, whether due to fraud or mistakes, and to issue parent company and the Group in accordance with professional an auditor’s report that includes our opinions. Reasonable assurance is ethics for accountants in Sweden and have otherwise fulfilled our a high level of assurance but is not a guarantee that an audit conduct- ethical responsibilities in accordance with these requirements. ed in accordance with ISAs and generally accepted auditing standards We believe that the audit evidence we have obtained is sufficient in Sweden will always detect a material misstatement when it exists. and appropriate to provide a basis for our opinions. Misstatements can arise from fraud or mistakes and are considered material if, individually or in the aggregate, they could reasonably be Material uncertainty related to the going concern assumption expected to influence the economic decisions of users taken on the We draw attention to the information in the Board of Director´s basis of these annual accounts and consolidated accounts. report and the section ‘Going concern assessment’ which states As part of an audit in accordance with ISAs, we exercise profes- that the company’s and the Group’s continued operations is sional judgment and maintain professional scepticism throughout dependent on successfully implementing planned measures aimed the audit. We also: at meeting the continued operations’ liquidity and capital require- • Identify and assess the risks of material misstatement of the ments. Should the planned measures not be undertaken there are annual accounts and consolidated accounts, whether due to fraud or material uncertainties which could lead to significant doubts about mistakes, design and perform audit procedures responsive to those the company’s and Group’s ability to continue its operations. Our risks, and obtain audit evidence that is sufficient and appropriate to opinion is not modified in respect of this matter. provide a basis for our opinions. The risk of not detecting a material Other Information than the annual accounts and consolidated misstatement resulting from fraud is higher than for one resulting accounts from mistakes, as fraud may involve collusion, forgery, intentional The Board of Directors and the Managing Director are responsible omissions, misrepresentations, or the override of internal control. for the other information. The other information comprises pages • Obtain an understanding of the company’s internal control rele- 1–7 (but does not include the annual accounts, consolidated vant to our audit in order to design audit procedures that are appro- accounts and our auditor’s report thereon). priate in the circumstances, but not for the purpose of expressing an Our opinion on the annual accounts and consolidated accounts opinion on the effectiveness of the company’s internal control. does not cover this other information and we do not express any • Evaluate the appropriateness of accounting policies used and form of assurance conclusion regarding this other information. the reasonableness of accounting estimates and related disclosures In connection with our audit of the annual accounts and con- made by the Board of Directors and the Managing Director.
100 NYNAS ANNUAL REPORT 2019 NYNAS ANNUAL REPORT 2019 AUDITOR’S REPORT AUDITOR’S REPORT
• Conclude on the appropriateness of the Board of Directors’ organization is designed so that the accounting, management of and the Managing Director’s use of the going concern basis of assets and the company’s financial affairs otherwise are controlled in accounting in preparing the annual accounts and consolidated a reassuring manner. The Managing Director shall manage the ongo- accounts. We also draw a conclusion, based on the audit evidence ing administration according to the Board of Directors’ guidelines obtained, as to whether any material uncertainty exists related to and instructions and among other matters take measures that are events or conditions that may cast significant doubt on the compa- necessary to fulfill the company’s accounting in accordance with law ny’s and the group’s ability to continue as a going concern. If we and handle the management of assets in a reassuring manner. conclude that a material uncertainty exists, we are required to draw Auditor’s responsibility attention in our auditor’s report to the related disclosures in the Our objective concerning the audit of the administration, and annual accounts and consolidated accounts or, if such disclosures thereby our opinion about discharge from liability, is to obtain audit are inadequate, to modify our opinion about the annual accounts evidence to assess with a reasonable degree of assurance whether and consolidated accounts. Our conclusions are based on the audit any member of the Board of Directors or the Managing Director in evidence obtained up to the date of our auditor’s report. However, any material respect: future events or conditions may cause a company and a group to • has undertaken any action or been guilty of any omission which cease to continue as a going concern. can give rise to liability to the company, or • Evaluate the overall presentation, structure and content of the • in any other way has acted in contravention of the Companies annual accounts and consolidated accounts, including the disclo- Act, the Annual Accounts Act or the Articles of Association. sures, and whether the annual accounts and consolidated accounts represent the underlying transactions and events in a manner that Our objective concerning the audit of the proposed appropriations achieves fair presentation. of the company’s profit or loss, and thereby our opinion about • Obtain sufficient and appropriate audit evidence regarding the this, is to assess with reasonable degree of assurance whether the financial information of the entities or business activities within the proposal is in accordance with the Companies Act. group to express an opinion on the consolidated accounts. We are Reasonable assurance is a high level of assurance, but is not a responsible for the direction, supervision and performance of the guarantee that an audit conducted in accordance with generally group audit. We remain solely responsible for our opinions. accepted auditing standards in Sweden will always detect actions or omissions that can give rise to liability to the company, or that We must inform the Board of Directors of, among other matters, the proposed appropriations of the company’s profit or loss are not the planned scope and timing of the audit. We must also inform of in accordance with the Companies Act. significant audit findings during our audit, including any significant As part of an audit in accordance with generally accepted audit- deficiencies in internal control that we identified. ing standards in Sweden, we exercise professional judgment and maintain professional scepticism throughout the audit. The exam- Report on other legal and regulatory requirements ination of the administration and the proposed appropriations of Opinions In addition to our audit of the annual accounts and consolidated the company’s profit or loss is based primarily on the audit of the accounts, we have also audited the administration of the Board of accounts. Additional audit procedures performed are based on our professional judgment with starting point in risk and materiality. Directors and the Managing Director of Nynas AB for the year 1 Janu- This means that we focus the examination on such actions, areas ary 2019 – 31 December 2019 and the proposed appropriations of the and relationships that are material for the operations and where company’s profit or loss. deviations and violations would have particular importance for the We recommend to the general meeting that the profit be appro- company’s situation. We examine and test decisions undertaken, priated in accordance with the proposal in the statutory administra- support for decisions, actions taken and other circumstances that tion report and that the members of the Board of Directors and the are relevant to our opinion concerning discharge from liability. As Managing Director be discharged from liability for the financial year. a basis for our opinion on the Board of Directors’ proposed appro- Basis for Opinions priations of the company’s profit or loss we examined whether the We conducted the audit in accordance with generally accepted audit- proposal is in accordance with the Companies Act. ing standards in Sweden. Our responsibilities under those standards The auditor’s opinion regarding the statutory sustainability report are further described in the Auditor’s Responsibilities section. We are The Board of Directors is responsible for the statutory sustainability independent of the parent company and the group in accordance with report on pages 21–26, and that it is prepared in accordance with professional ethics for accountants in Sweden and have otherwise ful- the Annual Accounts Act. filled our ethical responsibilities in accordance with these requirements. Our examination has been conducted in accordance with FAR’s We believe that the audit evidence we have obtained is sufficient auditing standard RevR 12 The auditor’s opinion regarding the and appropriate to provide a basis for our opinions. statutory sustainability report. This means that our examination of Responsibilities of the Board of Directors and the Managing Director the statutory sustainability report is different and substantially less The Board of Directors is responsible for the proposal for appro- in scope than an audit conducted in accordance with International priations of the company’s profit or loss. At the proposal of a Standards on Auditing and generally accepted auditing standards dividend, this includes an assessment of whether the dividend is in Sweden. We believe that the examination has provided us with justifiable considering the requirements which the company’s and sufficient basis for our opinion. the group’s type of operations, size and risks place on the size A statutory sustainability report has been prepared. of the parent company’s and the group’s equity, consolidation requirements, liquidity and position in general. Stockholm den 29 juni 2020 The Board of Directors is responsible for the company’s organiza- Ernst & Young AB tion and the administration of the company’s affairs. This includes among other things continuous assessment of the company’s and Rickard Andersson the group’s financial situation and ensuring that the company’s Authorized Public Accountant
101 NYNAS ANNUAL REPORT 2019 DEFINITIONS
Definitions and reconciliations of alternative performance measures
APMs refer to measures used by management Net Debt/equity ratio and investors to analyse trends and performance Long-term interest-bearing liabilities and current of the Group’s operations that cannot be directly interest-bearing liabilities reduced by cash and bank read or derived from the financial statements. deposits divided by equity. These measures are relevant to assist manage- ment and investors in analysing the Group’s Non-recurring items including write down performance. Investors should not consider these of assets APMs as substitutes, but rather as additions to To assist in understanding Nynas Group’s operations, the financial reporting measures prepared in we believe that it is useful to consider certain measures accordance with IFRS. It should be noted that and ratios exclusive of non-recurring items that have a these APMs as defined, may not be comparable significant impact and are considered to be important to similarly titled measures used by other com- for understanding the operating performance when panies. comparing results between periods.
Adjusted EBITDA Return on average capital employed Adjusted EBITDA is a measure of earnings before inter- (12 months rolling) est, taxes, depreciation, amortisation and impairment EBIT excluding non-recurring items as per cent age of charges. Adjusted EBITDA measures the Nynas Group’s average total assets less non-interest-bearing liabilities, operating performance and the ability to generate 12 months rolling. cash from operations, without considering the capital structure of the Group or its fiscal environment. Return on equity Adjusted EBITDA is defined as operating result before Net income as per cent age of average equity. depreciation excluding non-recurring items, for further definition see page 10 in Board of Directors report. Return on capital employed Profit after net financial items plus interest expense as Equity/assets ratio per cent age of total assets less non-interest-bearing Equity as a percentage of total assets at year-end. liabilities.
Last twelve months (LTM) Working Capital Last twelve months rolling have been included to assist This measure shows the seasonal swings that the investors in their analysis of the seasonality that the Nynas Group is exposed to in the Bitumen business, Nynas Group’s business is exposed to. with a peak in the high season in quarter two and three each year. Working capital is defined as inven- Net debt tories plus current non-interest-bearing receivables, Net debt is a measure to describe the Group’s gearing reduced by current on-interest-bearing liabilities. and its ability to repay its debts from cash generated from the Group’s ordinary business, if they were all due today. It is also used to analyse whether the Group is over- or underfunded and how future net interest costs will impact earnings. Net debt is defined as long-term interest-bearing liabilities and current interest-bearing liabilities reduced by cash and bank deposits.
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Nynas AB Box 10700 • Visiting address: Lindetorpsvägen 7 • SE-121 29 Stockholm Sweden • nynas.com • Phone: +46 8 602 12 00